What is the business plan?

In: Small Business and Entrepreneurship, Business Plans [Edit categories]

Answer:
A business plan is a business preparatory guide that defines the objectives, mission, market, plan
to penetrate the market, business process and financial projections in terms of assets, revenue,
profits, gains and losses.
Many business experts consider a business plan essential to organizing, managing, improving
production and resultant profit.
A good business plan will take into consideration the resent advances in social marketing
technology and it's impact on the global market.

References
http://businessplans.fimark.net

As a supplemental answer: if you're planning to capitalize your new business, your business plan
also functions as a marketing tool for you: the business plan is your first step in approaching
investors.

Please be advised, however, that to issue any security (equity or debt), your 'offering' must be
registered with the SEC (yes, even though you are a privately held company, when it comes to
capital raising you are governed by the Securities Act of 1933) or meet one of the Act's
exemptions.

Drop me a note if you have further questions: [email protected]

ይህ http://agmarketing.extension.psu.edu/Business/PDFs/beekeeperplan.pdf የ html ፋይል ቅጂ ነው።
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Page 1
6EE
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EXAMPLE

Preparing
a Business Plan
A Guide for Agricultural Producers

ova 0 0
0008 oo~ooo
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Province of
British Columbia
Ministry of Agriculture,
Fisheries and Food

Page 2
Preparing
a Business Plan
A Guide for Agricultural Producers
Bee Keeper Example
Province of British Columbia
Ministry of Agriculture, Fisheries and Food

Page 3
AC We would like to thank the following people for their
support in the preparation of this publication:
+ Howard Joynt, Financial Management Specialist,
B.C.
Ministry of Agriculture, Fisheries and Food,
+ John Gates, Apiculture Specialist, B.C. Ministry of
Agriculture, Fisheries and Food,
* and the following members of the B.C. Honey
Producers’ Association:
Ted Hancock, Dog Creek,
Colin Pullein, Kelowna,
Terry Huxter, Rock Creek,
Allen Paulson, Merrit.
Prepared under contract with B.C. Ministry of
Agriculture, Fisheries and Food by:
J. A, Lloyd Management Services
Kelowna, B.C.

Page 4
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
What Planning Can Do For You . . . . . . . . . . . . . . . . . . . . . . . . 2
What Goes Into Your Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Giving Your Plan the Right Look . . . . . . . . . . . . . . . . . . . . . . 4
Components of a Business Plan.......... .:. ................. .5
Title Page ........................................................... 6
Table of Contents.............................................. .8
Business Profile and Summary.. ......................10
The Business Organization.. ...........................12
Goals .............................................................. .14
The Marketing Plan .........................................16
The Production Plan ....................................... .20
Management & Labour.. ................................. .24
Financial Plans................................................ .28
Key Targets..................................................... .36
Appendices ...................................................... 38
Business Plan Worksheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Glossary of Business Terms.. ................................ .56
Comment Form.. ................................................... .60

Page 5
Managing an agricultural business in the 1990s and
beyond will be more complex with good planning
skills becoming increasingly important. As farming
becomes more capital intensive, margins narrow and
the adoption of rapidly changing technology becomes
the norm, planning techniques which are used in other
businesses must be applied to agriculture. One of
these planning techniques is preparing the formal
business plan. A formal business plan integrates
written goals with marketing, production and financial
targets into a management strategy for the business
along with identifying human resource requirements.
Other factors such as increased environmental
awareness and the globalization of agriculture
emphasize the need for effective planning at the farm
level.
The purpose of this publication is to provide farmers
with business planning information and a format for
developing a business plan for his or her farm
business. While information and sample business
plans are available for non-farm businesses, examples
of business plans for farms are difficult to find. Each
farm business is unique in terms of physical
characteristics, income level and people involved in
owning and operating the farm. This publication will
provide a good starting point to assist farm managers
to prepare formal business plans for their own
operation.
Terry Peterson, Director
Farm Management Branch
Ministry of Agriculture and Fisheries
Vernon, British Columbia

Page 6
You have a plan. You need to write it down.
Preparing a Business Plan is a working guide to help
you do just that. It will show you what a business plan
looks like and be a guide to refer to as you prepare
your own business plan.
How to use this guide
This guide is set up to use an explanation and then an
example to show you the process for preparing your
plan. The example follows through a business plan
which has been prepared to provide direction for the
management of a 500 hive beekeeping operation.
The left hand page of the guide explains what should
go into the section. The right hand page gives an
example of how it might look.
At the back of the guide, you will find blank
worksheets that you may want to use to help you in
structuring your plan. Remember, however, that while
this guide will give you a framework, your plan will
focus on your needs and your business information.
If you need more information
If you need more information, contact your nearest
B.C. Ministry of Agriculture, Fisheries and Food
district office, the Apiculture Specialist for your area,
or the Farm Business Management Branch. BCMAFF
provides a wide range of factsheets and worksheets
such as Planning for Profit contribution margins and
the Planning Package.

Page 7
Planning is a vital part of your successful farm
business. Comprehensive plans are routinely
prepared by larger urban firms as a normal business
practice. They improve communication, general
efftciency and decision making - important advantages
for all businesses, including your beekeeping business.
Planning does not replace enterpreneurial skills but it
can help avoid failures by:
* discovering the problems and pitfalls
* making the right moves to avoid them
* preparing to take advantage of new opportunities
Communication helps create a common purpose. You
can use your written plan to explain your goals and
strategies to people inside and outside the operation:
+ where the business is going,
+ what needs to be done,
+ the role of investors, family members and
employees
The business plan is your game plan within which you
+ set objectives and guidelines on paper.
+ create a standard against which to compare your
actual results with your anticipated results.
+ identify problems quickly, before they become
unmanageable.
+ keep on track
Because planning is so crucial to your operation, it’s
important to examine every aspect of your business
carefully and honestly. Be realistic in assessing what
you are capable of and the possibilities that exist for
your business. Some questions you should be asking
yourself are:
What exactly is the purpose of my business?
How good is my concept? Will I be able to
market my products?
What are my personal and business goals?
Do I have the necessary skills and abilities?
What are my approximate cash needs? Do I have
the resources? If not, where could the funds
come from?

Page 8
* Am I willing to take time to plan for my success?
A business plan puts a lot of valuable information at
your fingertips, ready to help you make those tough
decisions. The plan will also help you monitor progress
and cope with change and competition.
Your business plan should be prepared by you, the
owner/manager of the farm. Even if you use outside
professional help, your plan must be your own. You
have to be able to present it, summarize it and explain
it.
How to develop a plan?
To many farmers, planning is synonymous with number
crunching. Your business plan is much more. A look at
into your plan
your business should start with the foundation and build
on the goals and priorities of your business and family.
In this guide, the business plan works through a process
vof development:
+ Analyzing the farm business and the industry
* Determining the goals of the business and the
family
+ Choosing the strategies to achieve the goals in
terms of:
* markets for the products of the business
+ production resources
+ management and labour resources
* finances
The number crunching builds in each step of the
process. The financial planning serves as the reality
check for the business plan rather than being the driver
of the plan.
Your business plan will answer three main questions:
1. Where are you now ?
2. Where do you want to get to?
3. How are you going to get there?

Page 9
The Right look
Your business plan will likely be used to explain what
you want other individuals, both inside and outside
the business, to do for you. It is important to follow a
recognized process and format to set up your plan.
Also, as your business plan is a formal document,
appearance is important. The document should
* include a title page giving business name, date
and time period covered
have a detailed table of contents
be typed, double-spaced with clean margins
be simple and easy to read
be geared to outsiders - avoid industry jargon
be organized with essential information at the
front
have extra information in Appendices
The background papers
The formal plan will have the information needed to
guide the user though the scenario you are pursuing.
Meanwhile, you will likely be collecting all kinds of
additional information about your business. These
background papers are very helpful for further
analysis and for future planning. You will want to set
up an informal or working file to keep other
information and ideas such as:
+ detailed analyses and other numbers
+ support and source documents
* inventories and valuations
* projections based on other scenarios.
+ other opportunities not pursued and why
+ confidential information
+ competitive edge information
+ details of goals and objectives
* newspaper and magazine clippings
+ sensitive or confidential information

Page 10
cavlPoNENIs
OFA
BUSINESPIAN
A complete business plan will include the components
shown in the diagram below. Although each component
should be considered, the amount of detail and depth in
each will depend on the importance to your business
plan.
Your business plan may look different from the
examples used in this book. You should emphasize
those sections which best reflect the nature of your
business.
Business Profile

Page 11
Title Page
The Title Page helps your business plan look
professional. Remember that first impressions are
very important, especially to readers, such as bankers,
who see many plans.
As the example on the right shows, you should
include:
+ your farm name
* address
* telphone/FAX number
4 the period the plan covers
+ the person to contact
+ the date your plan was prepared
6

Page 12
Tie Page
Example
BUSINESS PLAN
1995 - 1999
to
Operate
GOLDEN GLOW FARMS
a 500 hive Beekeeping Operation
.
Prepared by:
Bill and Lila Washington
Date:
December 3 1,1994
Address:
Box 10808
Quesnel, British Columbia, V2J 2Cl
Telephone/Fax:
(604) 999-4444
7

Page 13
Contents
The Table of Contents outlines the topics covered by
the plan. It allows readers to jump immediately to
those sections which are of most interest.
Remember that people who may read your plan, such
as perspective lenders, are busy people. The table of
contents is a roadmap of where they can find more
detail on each topic.
8

Page 14
Table of Contents
Example
Table of Contents
Business Profile and Summary ........................................................ 11
The Business Organization.. ............................................................ 13
I Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Marketing Plan................................................................................. 17
Production Plan................................................................................ 21
Management & LabourPlan ........................................................... 25
Financial Plans
Contribution Margin Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Projected Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1
Cash Flow Forecast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Projected Statement of Assets, Liabilities
and Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Key Targets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9

Page 15
Business
Profile
and Summary
The Business Profile and Summary should attract
the reader’s interest, outlining the basics of your plan
and encouraging him or her to read the remainder of
the plan.
The reader should also know from the summary where
and how he or she fits into your plan, e.g. if the plan is
targetted to a lender, the summary should indicate how
much money you want, what for, what your security is
and how you intend to pay him or her back.
Items that you might include in the Business Profile
and Summary:
* purpose of the plan
+ business goals
* business activities and targets
+ financing needs or other input required from
outsiders
+ financial and physical resources available
This section is usually easiest to prepare after the plan
is completed.
10

Page 16
Businesss Profile
and Summary Example
Purpose of the plan
To provide a five year operating plan for an existing 500 hive beekeeping
business focussing on
* maintaining honey production
+ diversifying into other hive products (pollen, beestock)
* reducing debt and building equity in the farm and
+ building off-farm investments.
Business Highlights
+ 500 hive beekeeping operation producing honey
+ Established markets for all honey produced
+ Good line of equipment in good operating condition
+ Good facilities for handling bees and honey
* Family operated business
* High debt load but all payments up to date
Business Activities and Targets
Marketing Plan
* Diversify into pollen, comb honey, candles, and beestock sales
* Increase farm gate sales of honey by developing a brand name
+ Improve packaging and promotional activities
Production Plan
+ Maintain 500 hives in efficient honey production
* Produce alternate products (pollen, beestock, comb honey)
* Produce value-added wax products
Mangement and Labour Plan
+ Share work load with family
* Train and upgrade to handle new products
* Minimize hired help
Financial Plan
+ Pay off debt according to payment schedules
* Off farm investment strategy (education and retirement funds)
* Build equity
11

Page 17
g

Organization
Under Business Organization, you want to present
some basic information about your business and, for
an existing business, how you got to this point.
The business organization includes:
+ the basic structure
+ ownership
+ advisors
* special permits or licenses you have or need or
legislation you must comply with such as:
+ The Bee Act
+ Canada Agricultural Products Standards Act
* B.C. Agricultural Products Trading Act
* Worker’s Compensation Act
Business Operating History
Business Operating History describes the
development of the business to this point,
* how long it has been operating,
+ the size,
4 the resources employed.
+ strengths and weaknesses in the current
operation.
Supporting detailed information describing the history
of the business can be added as appendices to the
business plan, for example:
+ Market and price history
+ Production records for the past five years
4 Management/labor expertise & training
4 Financial statements
12

Page 18
Business
Example
Organization
Business Name
Telephone/Fax
GOLDEN GLOW FARMS
’
Box 10808
Quesnel, British Columbia, V2J 2C 1
(604) 999-4444
Type of Organization
Proprietorship
Licenses and Permits
* No special permits or licenses are required to operate or sell products in local
area.
+ Business is registered for GST and WCB.
Management and Labor
Name
Position
+ Bill Washington
Owner
+ Lila Washington
Assistant
Functions
Operator/Manager
Bookkeeper
Business Advisors
Name
* Mary Smith
* John Doe
+ Joe Black
Role
Accountant
Lawyer
Bank Manager
Business Operating History
+ started in 1979 on 20 acre land base as small beekeeping operation
* expanded slowly to 250 hives
* in 1985, expanded to the current size - 500 hives
* production focused on honey.
* some production sold direct from farm gate (about 9,000 lbs)
+ shelf space in retail outlets in Williams Lake and Prince George
* good line of equipment which is in good shape
* honey production has been provincial average or higher
+ debt financing for land purchase and expansion
13

Page 19
Your Goals will tell the reader what you are trying to
achieve with this plan.
This section will vary depending on who the reader is
and how much you want to tell them. It will be
considerably more detailed for internal use than for
external use.
A goal is the object or end that one strives to attain. A
well-defined goal:
* is a statement of action
+ specifies the time
+ is measurable
* is realistic given the resources and time you have
This section should contain at least:
+ a statement of mission or purpose that indicates
the overriding philosophy of the business
* the goals that you wish to achieve with this plan
Additionally, you might include:
* overall long term goals of the owner for the
business
+ other goals not directly related to the business
but that will have an impact on achieving
business goals
14

Page 20
Goals Example
Mission
,
To manage the farm as an efficient and profitable family-operated
beekeeping business, maintain assets in good working condition, reduce
debt and build equity.
Goal
Strategy
Tactics
Time
Long Term Goals
Pay off debt
Set aside retirement
funds
Maintain payment
schedule
No new debt
Start investment
portfolio
Priority on
high cash flow
for payments
Invest GST
and income
tax refunds
Start NISA
Account
11 years
15 years
Goal
Strategy
Tactics
Time
Short Term Goals
Diversify production
pollen
wax craft
comb honey
nut’s
Take Beemaster Course
Learn about pollen
Seminar/books
3 years
Build to 15 traps
Set 5 new traps
per year
Make candles & bar:;
2 years
Build boxes
2 years
Learn about
Books/ Join
1 year
production
Bee Breeders
3 years
15

Page 21
To prepare the Marketing Plan, you will consider issues
like:
+ what the market looks like
* potential customers
* competitors
+ what products are selling
+ is there more demand than supply
+ is your product different in any way
* price trends
* your strategy to put your products into the
marketplace
+ your competitive advantages
The Market
Describe the industry you operate within. Highlight the
market conditions that influence your business. Define
the opportunities that exist within the industry as well as
the industry-wide constraints that hamper your business.
Identify your potential customers and your competitors.
Identity major trends affecting the industry and your
business. This could include information on:
* consumer preferences
+ per capita consumption
+ pricing and delivery options
+ new technology
Where and how do you get this information? The
more you know about your potential market, the easier it
will be to find your niche. Important sources of
information include:
+ produce buyers
+ salespeople and suppliers
+ industry associations, conferences, seminars
+ industry periodicals
+ other growers
+ government and business services
+ newspapers and magazines
The more sources you use, the more reliable the
information you gather will be. You may want to name
your sources of information to increase the credibility of
your plan. Additional detail would be included in the
Appendices.
16

Page 22
Marketing Plan
Example
Marketing
Strategy
’
* To expand product lines and advertise and promote these to build new
markets.
* To expand amount of honey sold at farm gate.
* To add value to products.
+ To work with retail outlets to promote product and build customer loyalty
for our products.
The Market
The beekeeping industry is essential to the environment for pollination services
and for the pure natural hive products - honey, pollen, etc. Beekeepers are
independent and individualistic. Most beekeepers come to the industry to enjoy
the satisfying and interesting work with bees.
Honey and bee products have experienced low prices over the past few years.
There is very little generic marketing of honey and little coordinated consumer
education. There is also no quota or restriction on production.
Although most beekeepers focus on honey, some have expanded into alternate
products and into value-added and specially packaged honey products. Other
hive products (pollen, comb honey) are gaining customer recognition.
Current outlets (farm gate and contracted retail shelf space) can handle all the
honey we can produce.
Market Trends
Per capita honey use is static.
Opportunity to produce nut’s to fill markets in areas that are infested by
virroa mites.
Demand for pollination services are increasing.
Market Opportunities
There are no other large honey producers in the immediate trading area to
compete for farm gate sales.
Contracted retail outlets allow special promotions.
17

Page 23
Marketing
Plan
Product
The main objective of the marketing plan is to
determine the products that you can sell. Your plan
should discuss these products in terms of:
+ consumer preferences (containers, sizes, ..)
+ legal and political controls and regulations
(labelling,..)
Pricing
The price that you think you can get for the products
provides a tool to decide whether a new product would
be profitable and in what format. Your plan should
indicate:
+ how you set your price
+ what you anticipate prices will be into the future
+ how your prices differ from competitors pricing
Place
Where and how you will be selling your products is
the final leg of the marketing plan. What are your
alternatives for getting the product to the customer -
direct sales, retail outlets, bulk sales?
Promotion
In your plan, what is your strategy to make consumers
aware of your product? Your plan should outline the
methods you will use to increase acceptance of the
product and create interest in it.
What about creating demand for new products? If
you are introducing a new product or producing a
different product, who will you be selling to? How
will you assess what your customers want?
Your packaging and promotion will then key in on the
desires the customer has expressed.
18

Page 24
Marketing Plan
Example
Products
,
* Honey: liquid, comb
* Alternate products:
pollen, nut’s
* Value added products: wax, packaging
Prices
1995
1996
1997
1998
1999
Honey-wholesale
0 .95
0.98
1 .oo
1.05
1.10
-farm gate
1.25
1.25
1.30
1.30
1.35
-specialty
2.50
2.50
2.60
2.60
2.70
-comb
6.00
6.00
7.00
7.00
8.00
Wax-bulk
2.00
2.00
2.00
2.00
2.00
-candles*
17.50
17.50
17.50
17.50
17.50
Pollen-bulk
8.00
8.00
8.00
8.00
8.00
-packaged
15.00
15.00
15.00
15.00
15.00
Nuts
38.50
38.50
40.00
42.50
45.00
* based on $4.00 per pair
* Honey, pollen,
comb honey,
wax products
+ Nut’s
Place
- current retail outlets
- existing “farm-gate” customers
- lower mainland
- local area
Retail outlets
Farm-gate
Nut’s
Promotion
- special promotions to feature pollen, comb honey
and wax products
- more colorful displays in current shelf space
- new labelling and packaging
- signage
- display area
- labelling and packaging
- trade magazines
- local bee clubs

Page 25
The Production Plan is concerned with how to
efficiently produce the volumes and grades of the
product(s) you want to sell. You will need to
research the production methods that will work with
your operation. In this section, you will want to
consider:
* do you have the facilities?
* do you need additional equipment?
* how will your current production be affected?
* what are common production problems and
how will you tackle them?
* where can you get more information?
Production Strategy
What do you plan to produce and how? Your
strategies should describe your plans to achieve
targeted yields and quality.
Production Facilities
Include a description of the facilities and equipment
that you have in use or available. This may be
easiest to show in a scale drawing of your facilities.
You may also want to include a map of hive yard
sites, particularly if your plans include changes to
sites.
Under Capital Purchase Requirements, list any
new equipment and facilities you will need and what
you expect them to cost. This list should include
planned repair and replacement of facilities and
equipment.
20

Page 26
Production Plan
Example
Production Strategy ’
* Tomaintain 500 hive level in full production.
* To produce pollen by putting in pollen traps in spring.
* To produce nut’s by splitting hives in spring.
* To make to wax into candles and bars.
Production Facilities
* Currently have equipment and facilities to operate and maintain 500 hives
including extracting, storing and packing honey.
* Facility easily upgraded to better control climate for overwintering colonies
for nut production.
Capital Purchase Requirements
1995
1996
1997
1998
Pollen traps
600
600
600
Pollen cleaner/dryer
1,000
Nut boxes
3,450
2,300
5,750
Frames
1,800
1,200
3,000
Comb boxes
700
Wax molds
100
100
200
Fan for hot room
200
Total Capital
Purchases
1,600
5,950
5,300
8,750
1999
0
21

Page 27
Production History
The production plan should include a brief description
of historical production including products, strategies
and volumes/grades achieved.
Production Schedules
In your production plan, you will want to schedule the
changes in timing and use of facilities you foresee
because of new strategies and new products.
Production Volume
What are the production targets you plan to achieve?
Do you anticipate any changes in operating inputs and
costs to achieve these?
Other Production Information
You may want to include other production information
in your production plan or in the Appendix such as:
* Historical Yields
* Comparison to industry averages
+ Competitive advantages
* Constraints
+ Capacities
22

Page 28
Production Plan
Example
Production
History
’
* Emphasis has been on honey production and on hive management to
produce healthy colonies.
* Average production over 5 years - 120.8 pounds per hive
Production Schedules
1995 -
add comb boxes to 30 hives
pollen traps in spring on 30 hives
prepare hives for nut production
1996 -
split, feed and deliver nut’s
comb boxes on 50 hives
pollen traps on 30 hives
prepare hives for nut production
1997 -
increase nut, pollen and comb production
Production Volume
1995
1996
1997
1998
1999
# of hives
500
500
500
500
500
Honey -1bsIhive
120
120
120
120
120
-total lbs
60,000
60,000
60,000
60,000
60,000
Comb honey - lbs
450
700
900
900
900
Wax -1bs
500
500
500
500
500
Nuts
150
250
500
500
Pollen - lbs
75
75
100
100
100
Changes in Inputs and Costs
+ Additional labor
* NU C’S - increased, feed, protein
- queen cells
23

Page 29
Management &
Labour Plan
The Management & Labour Plan describes how you
expect to get the job done. Will you need additional
help? Will you need additional training? How can
you allocate your hours most effectively?
Management and Labour Strategy
What is the overall strategy for operating and
managing the business? Your strategy statements will
clarify the direction and priorities.
Job Functions
A distribution of the many jobs that have to be done
will show where there are gaps and where more help is
needed. Hiring can then be based on the needs
defined.
When making any changes in the operations, the
allocation of jobs has to be defined and analyzed. This
can be done in many ways. A time planner such as the
one shown in the example can work very well for an
operation with few people involved. Tasks are listed in
the time periods they must be done. Overlaps can be
quickly seen.
24

Page 30
Management &
Labour Plan Example
Management and Labour Strategy ’
* To operate as a family farm, working smarter and more efficiently.
* To minimize hired labor.
* To learn new technologies required to produce and market new products.
Job Functions (in days)
Jan Feb Mar Apr May Jun Jul Aug Sep Ott Nov DecTotal
Present Operations
Hive Management
Maintenance/Selection
3
3
16
6
5
5
10
5
3 56
Moving/Fencing
20
12
12
44
Monitoring
2
2
4
4
4
2
2
2
2 24
Repairs
5
10
5
5
2
2
2
5
5 41
Honey Production
444
12
Extracting
10 20 10
40
Packing
33333333444
4 40
Marketing
5
2
2
9
Selling-Farm Gate
5 5 10 10 10 4
4 48
Selling-Stores
44444444444
4 48
Administration
25352222224
2 33
Training/Meetings
2
3
5
Bookkeeping
4
3
4
111
1112
1
2 22
Planning
5522
14
Sub-Total
35 35 32 28 40 25 23 52 63 46 31 28 436
Nut Production
Selecting/Feeding
Packing/Marketing
Wax Products
Production
Packaging/Marketing
Pollen Production
Collection
Cleaning/Packaging
Comb Honey
Packaging
Total days
4
10
5
2
2
23
2
2
2
4
2
1
1 14
5 10
5 20
1
1
1
1
1
1
1
1
1
1
1
5 16
22
4
442
10
4422
12
38 38 39 49 54 28 28 57 66 56 45 39 535
Available days
Bill
Lila
Children
Hired
24 24 24 24 24 24 24 24 24 24 24 24 288
4 4 4 4 4 4 20 20 4 4 4
4 80
12 12 12 12 12 12 30 30 12 12 12 12 180
_ _ _ 9 14 - - -
26
16
5
- 70
25

Page 31
1 Management& 1
Labour Plan
.
26
Job Allocations
Your plan should allocate the jobs to specific
individuals as is done in the chart in the example.
Training
Once jobs are defined, training needs can be
assessed for each individual - both informal (on the
job) and formal.
Government Regulations
Government regulations and requirements regarding
work environment, safety and training should be
noted.

Page 32
Management &
Labour Plan Example
Job Allocations
Functions
Training Needs
Bill
Hive management
Nut production
Repair & Maintenance
for info
Marketing - wholesale
Planning
Lila
Bookkeeping
Label Design
Planning
First Aid
Greg
Joannie
Douglas
Hired
Hive management
(summer)
Extracting & Packing
Candle making
Direct sales
Direct Sales
Packing
Spring cleanout
Feeding
Extracting
Fall hive collection
Iour/Reading
Bee Breeders Assoc.
iomputer Accountin
#eve1 I, Gov’t Reg
Vher
:a11 BCMAFF
3 weeks
8 weeks
27

Page 33
The Financial Plan is the acid test of your plans and
ideas. Putting the plans into dollars shows up any gaps,
discrepancies and unrealistic assumptions!
Because much of the information that you will need is
already pulled together in your marketing, production
and labour plans, the task of putting your plans into
dollars is easier than you might expect.
Your financial forecasting should be based on what you
think is the most likely scenario for your business. It is
also valuable to consider what the numbers would be
should you have some poor years, and what some good
luck might bring, i.e. do the forecasts on a pessimistic
basis and on an optimistic basis. This will give you an
indication of the risk involved.
Useful tools for the financial analysis are the
+ Contribution Margin Analysis
* Projected Income Statement,
* Cash Flow Forecast and
* Projected Statement of Assets, Liabilities and
Equity
Contribution Margin Analysis
The Contribution Margin Analysis will tell you how
much each product contributes to the profits of the
business. The contribution margin is the amount left
after the direct costs are deducted from the income
produced by a given product.
Direct costs are those incurred for production. They are
usually separated from fixed costs which are those
expenses that would occur whether or not anything was
produced. The contribution is what is left after all direct
costs are deducted.
If you are looking at adding new products to your
operation, you might want to prepare a Contribution
Margin Analysis for each new product.
This is also a useful tool for analyzing the profitability of
existing products.
28

Page 34
Financial Plan
Example
1
Contribution Margin Analysis
1995
Pollen Production
Projected Price ($)
15
Production (lb.)
75
Income
Sales
1,125
Direct Costs
Trap handling
0
Cleaning/Sorting
0
Packaging&abelling
330
Contribution Margin 795
795
1,100
1,100
1,100
Production of Nuts
Projected Price ($)
38.50
Production (units)
0
Income
Sales
0
Direct Costs
Queens
0
Feeding
0
Packaging/Freight
0
Contribution Margin 0
3,131
5,564
12,383
13,601
1996
1997
1998
1999
15
75
15
100
15
100
15
100
1,125
1,500
1,500
1,500
0
0
330
0
0
440
0
0
440
0
0
440
38.50
40.00
42.50
45.00
150
250
500
500
5,775
10,000
21,250
22,500
450
750
1,500
1,500
1,894
3,157
6,315
6,315
300
529
1,052
1,084
29

Page 35
Projected Income Statement
The Projected Income Statement shows the
anticipated profits from the business after all direct
costs and fixed costs have been deducted. From the
income statement, you can see if what you are
planning to do will make money, how much and how
soon.
The Income Statement provides a better measure of
profit when it is prepared using the Accrual Basis of
Accounting.
The accrual basis takes into account the value of the
product that has been produced even if it has not yet
been sold (inventory). It also accounts for amounts
that have been earned but not yet received (Accounts
Receivable) and for amounts that have been spent but
not yet paid (Accounts Payable).
30

Page 36
Financial Plan
Example
Projected Income Statement
1995
Income
Honey - Wholesale 47,975
- Farm Gate 11,875
-
Comb 2,700
Wax - Bulk 800
- Candles 1,750
Pollen
1,125
Nuts
Total Income 66,225
Expenses
Feed - Sugar 4,998
- Protein 775
Queen Purchases 2,754
Hive Treatments 1,279
Labour
6,700
Machinery Costs 6,274
Hive Repair 1,357
Yard
Rent
1,200
Interest - Operating 1,370
Marketing/Promotion 6,777
Interest - Long term 6,4 13
Property Taxes 887
Utilities & Repairs 3,932
Overhead
1,566
Depreciation 10,798
Total Expenses 57,080
Net Income 9,145
1996
1997
1998
1999
49,000
49,500
51,450'
52,800
12,500
13,650
14,300
16,200
4,200
6,300
6,300
7,200
500
500
500
500
4,375
4,375
4,375
4,375
1,125
1,500
1,500
1,500
5,775
10,000
21,250
22,500
77,475
85,625
99,675
105,075
6,596
7,727
10,379
10,587
-
1,187
1,474
2,164
2,207
3,259
3,624
4,447
4,536
1,304
1,330
1,357
1,384
9,700
9,700
11,200
11,200
6,398
6,527
6,657
6,790
1,384
1,412
1,440
1,469
1,200
1,200
1,300
1,300
845
0
0
0
8,088
7,924
8,583
8,755
5,346
4,293
3,571
3,270
932
978
1,027
1,078
4,011
4,091
4,172
4,257
1,607
1,649
1,694
1,738
10,313
9,812
9,706
8,735
62,171
61,741
67,696
67,306
15,304
24,084
31,979
37,769
31

Page 37
Cash Flow Forecast
The Cash Flow Forecast measures the movement of
cash in and out of the business. It differs from the
income statement because it shows all of the sources
of cash, not just cash from sales.
Because cash is so important to a business, the cash
flow forecast is a popular planning tool. It will help
you to see when cash shortfalls may occur, and will
help you to determine if you will need outside funding,
how much and for how long.
The Cash Flow Forecast does not measure profit.
Often, a business will be profitable, but the cash may
be tied up in inventory or in fixed assets for some
time. In such circumstances, using only the cash flow
information could mislead you.
For your business plan, you may also want to prepare a
monthly cash flow projection to anticipate fluctuations
in cash during the year.
32

Page 38
Financial Plan
Example
Cash Flow Forecast
1995
1996
1997
1998
1999
Cash In
Honey - Wholesale 47,083
48,693
49,350
50,865‘
52,395
Honey - Farm Gate 11,875
12,500
13,650
14,300
16,200
Other Products 6,375
15,975
22,675
33,925
36,075
Accounts Receivable 1,433
0
0
0
0
Loans
0
0
0
0
0
Asset
Sales
0
0
0
0
0
Contributions**
3,000
3,000
4,500
4,500
Off Farm Income 24,990
25,490
26,000
26,520
27,050
Total Cash In 91,756
105,657
114,675
130,110
136,220
Cash Out
Expenses*
46,282
51,857
57,93 1
57,99 1
58,571
Accounts Payable 1,156
0
0
0
0
Asset Purchases 1,600
5,950
5,300
8,750
0
Principal Payments 12,974
11,209
7,452
2,724
3,024
Living Expenses 21,000
21,000
21,000
21,000
21,000
Education Fund* * 0
3,000
3,000
4,500
4,500
Retirement Savings 0
0
858
997
1051
Income
Taxes
0
400
1,200
3,200
3,800
Total Cash Out 83,012
93,416
90,741
99,162
91,946
Surplus (Deficit) 8,744
12,241
23,934
30,948
44,274
Balance Forward(22,830) (14,086)
( 1,846)
22,088
53,036
Cash Balance (14,086)
( 1,846)
22,088
53,036
97,311
* Less depreciation
**These amounts saved by children from increased wages
33

Page 39
Projected Statement of Assets,
Liabilities and Equity
The Projected Statement of Assets, Liabilities and
Equity measures the cumulative financial progress of
the business.
This projection is like a series of photographs of the
business taken at certain intervals. In the photographs
you see what assets the business has, who the business
owes money to and how much equity the owner has. By
comparison, you can see how these elements have
changed over time.
The equity reflects your investment in the business at a
stated time. Owner’s equity increases because of
accumulated income or because of contributions you
make to the business. This calculation is useful as a
target and a measurement tool.
Owner’s Equity is calculated based on the cost of assets
for the Statement of Assets, Liabilities and Owner’s
Equity (also called a Balance Sheet).
When changes in the value of assets occur due to
economic influence, the equity of the owner will also
change. When a statement is prepared reflecting these
market values, the owner’s equity is referred to as Net
Worth and the statement is a Net Worth Statement.
Historical Information
In addition to the projections, you may need to include
the financial history of your business.
If you will require additional financing, you should also
include information such as:
* inventory, accounts receivable and payable
+ insurance
+ appraisals
* personal net worth
This information could be included in the appendices.
34

Page 40
Example
Projected Statement of Assets, Liabilities and Equity
1995
1996
1997
1998
1999
Assets
Cash
(14,086)
( 1,846)
22,088
53,036
97,3 11
Education Fund
3,000
6,000
10,500
15,000
Retirement Savings
858
1,855
2,906
Inventory - Honey 14,393
14,700
14,850
15,435
15,840
Inventory - Supplies 3,100
3,100
3,100
3,100
3,100
Equipment 1 7 3 , 1 8 0
168,817
164,305
163,350
154,615
Total Assets 176,588
187,772
211,202
247,276
288,771
Loans Payable 51,009
Liabilities
39,800
32,347
29,623
26,599
Equity
Opening Balance 112,442
125,577
147,972
178,855
217,653
Contributions 24,990
28,490
29,000
31,020
31,550
Drawings
(2 1,000) (21,400) (22,200) (24,200) (24,800)
Income for Year 9,145
15,304
24,084
31,979
37,769
Closing Equity 125,577
147,972
178,855
217,653
262,172
Total Liabilities
and Equity 176,586
187,772
211,202
247,276
288,771
35

Page 41
The business plan gives you a standard against which
to compare your actual results with your planned
results. Regular review of your plan, comparing it to
the results shown in your actual records, will allow
you to identify problems and make adjustments
quickly.
Some of the targets you set in your plan may warrant a
more constant vigil. For these key targets, you might
want to set up a tracking method that will show your
progress on a timely basis.
Your key targets, which might be average price per
pound, winter survival populations or pounds of
honey sold per month, are those that will
* show your progress
+ give you early warning signs of future problems
* be important to achieving your goals
Measuring tools that give a graphic reference point are
very useful. They will make tracking progress easier.
Consider using
* a thermometer to draw in the progress you
are making
* charts and graphs to show growth
* pie charts to measure changing percentages.
36

Page 42
Key Targets
Example
Key Targets
Farm Gate Sales
Production
Financial
Finmc&Z lnl46rtrrr
Loam & Net Incrnr
Growth in Net

Page 43
Do you want to supply more detail to explain some
aspect of your plan? Is there some additional
information that you feel is helpful to understanding
the plan? Do you have a brochure for a new asset?
Organize them into Appendices at the end of the
Business Plan.
The Appendices contain those extra items that you
want to include in your plan to support or provide
detail for sections of the main document. These
might include some of the following:
* Financial Statements for the past five years
+ Personal resumes of key people
+ Brochures showing new equipment
* Important articles or news items
* Insurance
* Drawings or plans
* Appraisal reports
+ Important contracts
+ Detailed forecasts
38

Page 44
Appendix
Example
Historical Data
Average Prices
1990
1991
1992
1993
1994
Honey-wholesale
0.90
0.91
0.91
0.92
0.93
-farm gate
1.17
1.18
1.17
1.20
1.20
Production Volume
1990
1991
1992
1993
1994
# of hives
500
500
500
500
500
Honey-lbdhive
130
94
127
120
133
-total lbs
65,000
47,000
63,500
60,000
66,500
Financial Indicators
1990
1991
1992
1993
1994
Assets
186,599
220,356
188,176
177,581
182,378
Liabilities
88,446
124,089
109,854
95,211
65,139
Equity
98,153
96,267
78,322
82,370
112,442
Total Income
77,700
70,400
49,750
68,625
68,655
Total Expenses 73,079
72,785
70,485
68,087
59,437
Net Income
4,621
( 2,385) (20,735)
538
9,218
39

Page 45
BUSINESS PLAN
19
- 19
to
Operate
a
Beekeeping Operation
Prepared by:
Date:
Address:
Telephone/Fax:
40

Page 46
Table of Contents
41

Page 47
Purpose of the Plan
Business Highlights
Business Activities and Targets
Marketing Plan
Production Plan
Management and Labour Plan
Financial Plan
42

Page 48
Business Name & Address
Telephone
Type of Organization
Licenses and Permits
Business Management
Name
Position
Function
Business Advisors
Name
Role
Business Operating History
43

Page 49
Mission

I Goal
Strategy
I
Tactics
Time
Long Term Goals
I
I
I
Short Term Goals
44

Page 50
Marketing Strategy
The Market
Market Trends
Opportunities
45

Page 51
Product
Projected Prices
Place
Promotion
46

Page 52
Production Strategy
Production Facilities
Capital Purchase Requirements
47

Page 53
Production History
Production Schedules
Production Volume
Changes In Inputs and Costs
48

Page 54
Management and Labour Strategy
Job Functions
49

Page 55
Job Allocations
Name
Functions
Training Needs
Other
50

Page 56
Projected Price
Projected Production
Income
Direct Expenses
Contribution Margin
Projected Price
Projected Production
Income
Direct Expenses
Contribution Margin
Contribution Margin Analysis

r
r
L
51
r

Page 57
Projected Income Statement
Income
Total Income
Expenses
Total Expenses
Net Income
52

Page 58
Cash Flow Forecast
Cash In
Total Cash In
Cash Out
Total Cash Out
Surplus (Deficit)
Balance Forward
Closing Balance
53

Page 59
Projected Statement of Assets, Liabilities and Equity
Assets
Total Assets
Liabilities
Total Liabilities
Equity
Opening balance
Contributions
Drawings
Closing Balance
Total Liabilities and
Equity
54

Page 60
Key Targets
Target
Time
Measurement Tools
L
55

Page 61
GLOSSARY Accrual Basis of Accounting:
OF
BUSINESS
A method of accounting in which revenue and expenses are recorded
in the period when they are earned or incurred regardless of whether
or not they have been paid.
TERMS
Amortization:
The systematic reduction of a balance in an account over a period of
time. Most often this term is applied to long-term liabilities and
intangible assets.
Assets:
Things of value under the control of the business entity.
Balance Sheet:
A statement summarizing the assets, liabilities and equity of a
business entity at a given date. (Sometimes called Statement of
Assets, Liabilities and Equity.)
Capital Cost Allowance:
The allocation of the cost of an asset as a deduction against the
taxable income of the business at rates prescribed by Income Tax
law.
Capital Gain:
A term used for income tax purposes to define, in most cases, the
amount that proceeds from the disposition of an asset exceeds the
original cost of the asset.
Cash Basis of Accounting:
A method of accounting by which revenues and expenses are
recorded when cash is actually received or paid regardless of when
the agreement to sell or purchase may have taken place.
Contribution Margin:
The excess of total revenues minus variable costs, indicating funds
available to cover fixed costs and profits.
cost:
The purchase price of goods or services consumed in the business.
Credits:
An accounting convention requiring the recording of entries on the
right hand side of an account with the effect of increasing liability and
equity accounts and decreasing the asset accounts.
56

Page 62
GLOSSARY

OF
Chart of Accounts:
A systematic listing of acccounts into categories and subcategories.
BUSINESS
Cost Basis of Asset Valuation:

TERMS
Assets are entered into and carried in the books at their original
aquisition cost.
Current Assets:
Assets that are used up or converted to cash within a fiscal year.
Current liabilities:
Obligations which will become due and payable within a short term,
usually the fiscal year.
Debits:
An accounting convention requiring the recording of entries on the
left hand side of an account with the effect of increasing asset
accounts and decreasing liability and equity accounts.
Debt:
Obligations to entities outside of the business, usually contractual.
Deferred Income Taxes:
The accumulated amount by which income taxes calculated on net
income is decreased because of timing differences. Differences arise
mainly as a result of cash basis reporting, and from depreciation rates
that differ from prescribed rates for income tax purposes.
Depreciation:
The allocation of the cost of an asset against the operating income of
the business to reflect useage of the asset to produce income.
Direct Costs:
Costs that are directly related to production activity. If no production
or activity takes place, direct costs are zero. Many direct costs are
also variable.
Dividends:
Distribution of earnings to shareholders. Amounts are declared by
the board of directors and are paid in proportion to shares held.
Equity:
Ownership in the assets of the business held by proprietors, partners
or corporate shareholders.
57

Page 63
GLOSSARY
OF
BUSINESS
Expense:
A cost incurred by a business for the purpose of producing revenue.
Fiscal Period:
The accounting period, usually one year, over which the effect of
transactions are recorded and financial progress is measured.
Fixed Assets:
Assets with a long term usefulness, usually held for the production of
goods or services rather than for resale.
Fixed Cost:
Costs that remain relatively unchanged regardless of the volume of
production or activity within a range of volume. Examples include
building insurance and property taxes.
Liabilities:
Obligations of the business to outsiders.
Inventory:
Items purchased or produced that are for sale or for use in the
production of goods for sale.
Liquidity:
The ability of the business to meet its financial obligations as they fall
due, measured by the comparison of current assets to current
liabilities.
Mortgage:
A conveyance of a legal interest in property from one person to
another as security for the payment of a debt or other obligation.
Net Book Value:
The net value on the books of a fixed asset after deducting
accumulated depreciation.
Net Income:
The excess of revenues over expenses (variable plus fixed) for a
given period of time.
Net Worth:
The difference between the market value of assets and the market
value of liabilities at a given time. Net worth represents an estimate
of what the owner would receive if assets were disposed of and
liabilities were discharged.
58

Page 64
GLOSSARY Prepaid Expense:

OF
An amount paid out which is expected to yield a benefit beyond the
current accounting period. The amount is carried on the balance
BUSINESS
sheet as an asset and charged to expenses as the benefit is realized.
TERMS
Projected Cash Flow Statement:
A statement used as a planning tool to show expected future sources
of cash from operations, asset sales, owner contributions and loan
proceeds less cash utilized for business expenses, capital purchases,
owner withdrawals, and loan payments.
Revenue:
Money earned by the business as a result of business activities.
Share Capital:
The ownership interest in an incorporated company that is represnted
by the shares of that corporation.
Term Liabilities:
Obligations to outsiders that will become due and payable at a time
beyond the current fiscal period.
Transactions:
Business events engaged in by a business entity.
Variable Costs:
Costs that vary directly with the volume of production or activity. If
no production or activity takes place, variable costs are zero.
59

Page 65
Preparing a Business Plan Comment Form
Please send us your comments and help us serve you better.
We would like to know what you think of this publication . . . what’s good and what could be improved, and
how. Please take a few minutes to give us your opinions and ideas. Please return the completed evaluation
form to:
Extension Systems Branch, B.C. Ministry of Agriculture, Fisheries and Food
808 Douglas Street, Victoria, British Columbia, VSW 227
1
2
3
4
5
6
r
I
ri
l
Question
. You are (please check appropriate box)
Response
Cl Beekeeper
Cl Industry
0 Government
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. Overall, how do you rate this material?
(please rate on the scale of 1 to 5,
I being poor and 5 being excellent)
. How did you find out about this publication?
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Excellent
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. . Is the information relevant to your needs?
8. Is the writing style
L Is the amount of detail
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Not Enough
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1. What are your main sources of information on
business management?
0 BCMAFF staff
0 Industry
Cl Research Station
Cl Other Farmers
0 Trade Journals/Periodicals
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$. Preparation costs are high. If future editions
were priced, indicate the amount you
would be willing to pay?
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Haramaya University, Sheep and Goat Fattening and Breeding

Project: A template.
Introduction
Livestock population survey results conducted by CSA (2007/08) estimate the sheep and
goat population of Ethiopia to be about 26.1 and 21.7 million head, respectively. This
does not include seven zones of the Afar and Somali regions, mainly pastoral areas that
traditionally have high livestock numbers, which has the potential to substantially
increase these population estimates. Sheep and goats command a strong position in the
live animal and meat export trade to countries in the Middle East with future high market
opportunities. This is partly because Ethiopian meat can be categorized as high quality,
organic meat as it is not exposed to industrial pollutants like in industrialized nations.
However, low carcass weight and yield from both species limits potential for export as
well as the availability of meat to fulfill the increased domestic demand for small
ruminant meat. Due to poor muscle development, such carcasses have poor conformation
and quality, which results in a low price given in the competitive market. This and other
problems call for investment and improved management in many aspects of sheep and
goat production in order to improve the productivity of these species on a sustainable
basis. One needed improvement is the formation of planned business oriented breeding
and fattening programs. A planned breeding program may include selection within the
indigenous breed and a crossbreeding program between indigenous and adaptive exotic
breeds with better genetic potential. Fattening or finishing programs will improve the
animal body condition, carcass conformation and quality making these carcasses more
competitive in local and export markets.
Haramaya University (HU) is currently upgrading its livestock farms to the level of
business enterprises to better provide three basic services:
❖ To serve as a model farm for teaching
❖ To facilitate staff and student research activities
❖ To generate revenue from the farms making them self-sufficient and profitable
enterprises
To achieve these objectives, the University is investing in its farms. Investing in a farm is
often an expensive undertaking and can be financially stressful. Taking this aspect in to
consideration, creating a business plan is an essential step for any enterprise regardless of
the size of the business. Business plans can serve as a road map to chart the course of the
business.
The most critical problem confronting low-income farmers today is the need to maintain
an adequate level of income. To combat this problem, farmers are diversifying into high
value specialty crops and animals. In the present scenario, globally, diversification into
alternative enterprises appears to be gaining popularity and economic importance as one
way to boost an enterprise or increase family income. This is supported by the national
policies of the Federal Democratic Republic of Ethiopia which encourages diversified

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activities. Diversified enterprises can be profitably integrated into small scale operations
benefiting both rural and urban groups of entrepreneurs. Haramaya University can benefit
through boosting its revenue generation and improving teaching and research quality
through sheep and goat breeding and fattening projects. Moreover, the surrounding
community will benefit from the breeding and fattening enterprises in various ways.
The current business plan considered and addressed the following in order to improve
and transform the sheep and goat business into a profitable self supporting enterprise:
• Lesson: This project will help us to learn a lesson from earlier setbacks. In the
process of preparing this project, we learned how to negate factors that caused
earlier setbacks. The project, therefore, helped us improve and generate positive
and sustainable results.
• Pragmatic approach: In the past, these farms had a number of problems related
to finance and management. Therefore, with an optimistic approach we hope this
project will benefit from the introduction of innovative management, economic,
financial and advanced scientific measures to overcome those drawbacks and to
make this venture a sustainable operation.
• Unreliable financial support: In the past, the sheep and goat farms funding was
mainly dependant on short term projects. The financial structure of the farms
fluctuated with availability of project funds. This financial instability prevented
the smooth operation of the sheep and goat farms. The current project plan will
enhance the introduction of innovative management, economic and financial
measures to overcome those drawbacks and to produce sustainable business plan.
• Mission objective: Resource optimization and maximization to achieve
sustainable development goals.
• Goal/Vision:
❖ To embark on a sustainable plan to achieve a reliable source of organic small
ruminant meat for the local, regional, national and international market
❖ To be leader in the supply of organic small ruminant meat. This vision is
strongly supported by the conditions presently prevailing in Ethiopia, i.e., a
total agrarian based economy with low levels of release of industrial effluents
and other pollutants which are either directly or indirectly affecting meat
quality and its impact on health of the consumer.
• Historical reasons: Historical evidence shows that Ethiopia was the “Bread
Bowl” for the Roman Empire in ancient days. As in the past, Ethiopia can also be
a good quality meat exporter to show that history repeats.
• Linkage effect of the project: There is a possibility of linking this project with
the community in order to improve livelihood. The linkage effect of the current
project could be reflected in the following areas.
❖ Nutrition and health: To generate a source of nutritional and health
improvement, especially for local population.
❖ Socioeconomic aspect: Poverty alleviation for disadvantaged farmers
especially women.
❖ Sustainability aspect: Income generation, capacity building and human
resource development.

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❖ Innovation: Small ruminants breeding and fattening can be linked with

microfinance.
Haramaya University Goat and Sheep Enterprise history and ownership
The Haramaya University Small Ruminant Farm consists of the Sheep and Goat Farms
both of which are situated on the main campus. The Sheep Farm was established way at
the opening of the Animal Science Department in the 1960s to support small ruminant
teaching and research activities. The Goat Farm was established in 1988 through an
agreement between FARM-Africa and the Ministry of Agriculture for a dairy goat
development project. The primary objective of the Goat Farm was to serve as a breeding
center. The center produced crossbred goats (Anglo-Nubian×Somali) that were
distributed to the community, particularly women, to increase income generation through
improved milk production.

The infrastructure and management of the Sheep Farm has been remained poor and has
served as a teaching and research center since its establishment. The Goat Farm has been
better equipped and managed. Unlike the Sheep Farm, the Goat Farm has impacted the
community during the last 20 years through distribution of crossbred goats to female
farmers. Further, different research activities have been undertaken by Haramaya
University and other university’s students using different goat breed crosses.
However, the capacity and service of the Goat Farm has diminished, particularly after the
FARM-Africa project ended. The decline was attributed to financial constraints and poor
management practices. These have resulted in decreased numbers of animals, particularly
purebred exotic animals. The new business plan aims to stimulate and transform sheep
and goat production into a sustainable self-supporting enterprise that generates revenue
and support quality research and teaching.

General objective
❖ The main objective of the project is to evaluate the economic potential of the
existing Sheep and Goat Farms by estimating the investment requirements,
production costs and returns for the purchase and sale of high quality sheep and
goat for fattening and for the breeding program of both sheep and goat farms for a
period of five years.
❖ To provide baseline information and guidelines for future project development of
crossbred goats and sheep so as to provide an economic incentive for enterprising
entrepreneurs in the rural and urban centers.
❖ To develop a project that will serve as a template to attract more investors towards
similar businesses.

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Specific objectives
❖ To make the goat and sheep project economically viable by regularly undertaking
fattening of purchased and farm-born male offspring having superior growth and
carcass characteristics.
❖ To generate herds of crossbred female and male kids for marketing and
distribution to smallholder producers and private firms on a profitable basis
❖ To provide modern research and developmental facilities for the scientists and
students of Haramaya University.
❖ To make the goat and sheep project profitable by introducing effective
management practices.
❖ To harness the special skills of the staff related to animal sciences, veterinary
science, management and social sciences for the development of both farms on a
sustainable basis.
❖ To make Haramaya University a business hub with a vision and mission to
establish a Centre of Excellence in Sheep and Goat Research that will breed and
distribute animals of high genetic potential to enterprising groups from rural and
urban centers for rearing and consequently play the role of a buy-back facilitator.
❖ To promote an ultra-modern, state-of- the-art abattoir, meat and meat product
production center meeting international standards for domestic consumption and
for international export.
❖ To identify and market other related product lines such as milk, manure, skin and
other by-products from small ruminant production.
❖ To develop a model goat and sheep enterprise project which will attract more
investors in sheep and goat breeding and fattening businesses to fulfill the large
domestic and international demand for sheep and goat meat.
❖ To contribute towards the process of diversification of economic activities, that is
aligned with government policies, through this project and similar project which
use this as a model.

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Rationale for establishing a small ruminant breeding and fattening

enterprise
❖ To enhance the income generation potential of smallholder farmers.
❖ To optimize the efficient use of pastoral and agro-pastoral lands for small
ruminant production.
❖ Create employment opportunities in farmer households by introducing community
level adoption schemes based on community impact workshops.
❖ Link women farmers, small ruminants and microfinance in an innovative scheme
by providing women entrepreneurs the opportunity to rear small ruminants in
open grasslands.

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❖ Introduce systems of cooperatives to target village economic constraints of small

ruminant production.
❖ Use small ruminant products to enhance family nutrition and health of children.
❖ Poverty and gender alleviation for economically vulnerable groups, especially
women farmers
❖ Transfer and share technological improvements achieved through research and
academic pursuits

Aspects of innovation
Socio
economic
policy

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Application of sustainomics to the project

The concept of sustainable development encompasses three main points (Munasinghe,
1993). This study identifies some of the key constituent elements of sustainomics and
how they help to build a strong linkage between these three aspects of sustainability.
1. Economic: Growth – Efficiency – Stability
2. Social: Empowerment – Inclusion/ Consultation - Management
3. Environmental: Resilience – Natural resources - Pollution
Economic: Economic welfare is evaluated in terms of willingness to pay for goods and
services consumed, especially for good quality products. Most economic policies are
directed towards enhancing income and induce more efficient production and
consumption which, in this project, is represented in both the short-run and long-run as
high quality products (animals) are distributed regularly to the community. This
economic efficiency will improve the welfare of the local farmers (Pareto Optimality).
Social: Social development is the improvement in both individual well-being and the
overall welfare of society, which is in line with equity and poverty alleviation. The social
aspect in this study is expected to be vulnerability and how to improve equity and ensure
that basic needs are met. The social domain focuses on the enrichment of social relations
by helping downtrodden farmers through the supply of genetically superior animals.
Sustainomics of
the project

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These animals will have the ability to produce over an extended period of time, providing
products that will sell at a favorable price to provide sustained financial support. Another
aspect is reducing the vulnerability and maintaining health (resilience, vigor and
organization) of social and cultural systems by empowering rural women.
Environmental: The environmental domain emphasizes the protection of the integrity
and resiliency of ecological systems. This objective is very critical and important in the
view of the Ethiopian environment as it is suitable for the production of organic meat
which has a good marketing potential both domestically and internationally.
Strategic marketing and pricing policy

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Proposed financing
Haramaya University will finance the initial project investment and operating costs until
the end of the second year. Different projects conducted at the Sheep and Goat Farms,
such as the Breeding, Evaluatiion and Distribution Site at HU of the ESGPIP, are
considered as sources of financing since some of the fixed costs, such as buildings,
purchase of foundation stock etc., are made availble to the project as per the agreement
with HU. Starting from years three through five, the Sheep and Goat Farm is expected to
finance itself from its net income. The estimated funds that would be provided to the
proposed HU sheep and goat enterprise will enable it to meet its initial investment and
initial years’ operational costs. Funds will be used to finance land and forage
development, construction and maintenance of buildings, purchase of equipment and
purchase of breeding stock.
Management and organization
The University Revenue Generation Department and the Department of Animal Sciences
are primarly responsible for the management and coordination of the sheep and goat
enterprise and research project. The project management will have a separate manager
accountable to the above departments. The Sheep and Goat Farm will have research and
teaching support and revenue generation mandates. The project will have its own
independent staff possessing technical as well as managerial skills. The project also
requires collaboration of several different faculties and departments in the University like
the Veterinary Medicine, Buisness and Economics, Finance and Budget Division,
Research and Extension Office, etc.
Products, service, market and competitors
Products/services
Taking the existing problems in to account, the project intends to offer a range of
breeding and fattening activities of small ruminants of different ages and breed types. The
main course of activity is divided into goat and sheep farming, which involves breeding,
fattening/meat production, milk production (in the intermediate period) as well as a range
of value addition and byproducts such as manure, skin, and offal. In addition, the project
will also provide training services for farmers groups, cooperatives, private investors or
others who are planning to enter sheep and goat businesses. The project will provide
research opportunities for University scientists and students and other national and
international institutions, NGO, universities and research centers, as well as an extension
service for local farmers and others.

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Market Analysis
Opportunities, market inflow and out flow, target customers, past supply and present
demand
Livestock and livestock products marketing is one of the major activities in the project
region. Trading is almost entirely private, mainly smallholder producers, with no
involvement of the public sector. There are few restrictions and control of livestock
marketing, but local authorities have some regulations and charge fees. Traders and
brokers operate at all segments of the market. Moreover, stock movement between
markets is largely unregulated. The peculiar livestock production system in the project
region is the pastoral production system that is based on extensive grazing of communal
land. Animals supply milk for family subsistence. There is strong traditional livestock
fattening in the intensively cultivated mixed production system in the highland areas of
the region. These production systems are acknowledged for possessing better quality
indigenous sheep and goat breeds, which can serve as a supply of breeding stock for
breed improvement programs.
Currently, small ruminant production is one of the most profitable enterprises in Ethiopia.
There is a huge demand for small ruminant meat, milk, skin, manure and other
byproducts. However, there is little quantitative information on the milk and meat
production characteristics of Ethiopia's indigenous sheep and goat breeds. Goat milk is
highly valued among the societies where it is consumed entirely by the family. When
sold, goat milk fetches a higher price than cow milk. The amount of milk produced by
goats and sheep varies tremendously. The major factors as defined by the owners to
affect production are season and breed.

Sheep and goat meat is favored by many Ethiopians as a major component of their daily
diet and there appears to be a shortage of the product especially during religious holidays
and other festivals such as weddings. Thus, the local market for finished sheep and goats
is promising. The current local market price of these animals is reported to be highest
ever recorded. The local market does not restrict itself to selling in the project region but
also to major cities like Addis-Ababa where there is potential to market large numbers of
animals. Furthermore, the expansion of modern supermarkets in big cities and the
demand for processed and packed sheep and goat meat is encouraging increased interest
in meat processing and packaging. In Ethiopia, there are 6 export and 92 municipal
abattoirs. Traders and butchers usually purchase sheep, goats and cattle. Fattened sheep
and goats can be easily exported to Djibouti and the Middle East through Dire Dawa, a
town located about 40 km from the proposed project site, which can be facilitated
through contract farming with the existing potential exporters. The current improved
disease prevention measures and increase coverage of veterinary service will also
promote export of live animals and their products to the Gulf States and Middle East.
Moreover, establishing a contractual agreement between trading firms or with those
involved in the production of similar products can open access to new markets.

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Past Supply and Present Demand

Table 1 depicts total exports of meat and meat products during the period 1997 - 2006.
Recent developments reveal remarkable growth in the exports of meat from the country.
According to the Ethiopian Meat Producers and Exporters Association, on average,
2979.21 tons of meat and 6396.19 tons of livestock were exported annually to the Middle
East from 1997 to 2006. The Association expects continued increases in meat and live
animal export in the coming years.
Table 1. Export of meat and live animals
Year
Cattle, sheep and goat meat
export
(metric tons)
Cattle, sheep and goat live
animal export
(Metric tons)
1997
1716.4
1304.7
1998
1529.4
1323.6
1999
2078.3
918.9
2000
1976.8
1766.3
2001
869.7
214.1
2002
662.5
165.7
2003
1722.2
607.1
2004
4007.0
3141.4
2005
7274.5
21226.0
2006
7955.3
33294.1
Total
29,792.1
63,961.9
Average
2979.21
6396.19
Source: National Bank of Ethiopia (NBE), Annual Reports.
Within the region, the focal points for small ruminant consumption are the towns of Dire
Dawa, Jijiga and Harer with populations of 822,000, 369,523 and 131,000, respectively.
This illustrates the potential market for small ruminant products in the region. However,
due to the long dry season, which lasts for more than 6 months in a year, insufficient
quantity and quality of animals is supplied to Harar, Dire Dawa, and the surrounding
small towns found in East and West Harerge zones. These types of animals have low

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market value since they are not demanded for immediate use by urban dweller, butchers
and exporters. If these animals are provided with health care and high energy ration under
feedlot conditions, their body weight and condition will be improved during the proposed
fattening period and hence, it is possible to supply improved quality products to the
residents at a reasonable price.
Market segmentation
The project will supply:
❖ Female sheep and goats of improved genotypes to farmers around Harari region,
Dire-Dawa and East and West Harerge zones of Oromiya.
❖ Fattened goats and sheep for farmers, urban dwellers and export.
❖ Goat milk for customers at Haramaya University and in Harar and Dire Dawa
beginning after the mid-term of the project.
❖ Processed and packed mutton and chevon to consumers on Haramaya
University campus and supermarkets in the region starting during the last term
of the project.
Competitiveness on the market and competitors
Since agricultural market is a proxy for competitive market, the expected market for the
products of the project will get high competition from local farmers, private farms
engaged in similar activities around East and West Haragghea region of Oromiya, Hareri
Region, Dire Dawa Town, Somali Region and other areas of the country. The major
difference between products supplied by the project and those supplied by competitors is
that the product supplied by the project will be well managed, free of dieses and at the
age and quality demanded by customers.

Technology
In order to carry out its activity, the project will use exotic breeds for crossbreeding and
artificial insemination purposes. In addition, higher quality indigenous breeds of sheep
and goats will be used both for crossbreeding and fattening programs. Furthermore, best
management practices and veterinary service will be in place in order to supply superior
quality products and services to customers. In general, up-to-date technologies and
research results are assumed to be utilized by the project.
Competitive strategy
Marketing functions or services include many phases such as assembling small ruminants
from local farmers, managing them to a required product, transporting to potential
markets and distributing them to customers, such as export agencies, hotels, and
restaurants. In economic terms, the utility of time, place and form will be added so that
acceptable products will be offered to the ultimate consumer at the required time.
Production and pricing strategy
The major objective of the project is to produce small ruminants to maximize profit and
make the project sustainable. To achieve this objective, consideration of production and

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other costs that determine profitability is necessary. Haramaya University is situated in a

transitional zone between the lowlands of Eastern Ethiopia and the Eastern plateau,
where the Ogaden breed of sheep and goats are produced. Ogaden sheep and goats are
relatively larger in size and have acceptable conformation for meat production and
demand for export versus highland sheep and goats that have high demand in the local
market. Therefore, sheep and goats of Ogaden and Hararghe highland types can be
supplied for the project at a relatively lower cost for fattening and breeding purposes.
In addition, the profit from small ruminant production is attained by minimizing feed
costs which account for more than half of the total cost of production. Any attempt to
improve commercial small ruminant production and increase its efficiency, therefore,
needs to focus on better utilization of available feed resources. Accordingly, the
Haramaya University farm has 10 hectares of land used for grazing and forage
production. In addition, the project can also purchase feed from Haramaya University’s
feed processing. Through using these resources the cost of production will be lower than
that of commercial small ruminant farms in the country. In addition, the project will
adjust the price of products supplied to the consumers based on types of animal and
market research.
Promotion
To promote its products, the project will use different promotion means such as handbills
and posters, press releases in local newspapers and magazines, and on radio and TV. In
addition, seasonal promotions will be done especially for religious holidays. The
promotion will be based on particular types of products prepared for each occasion.
Risk assessment
Risk analysis
A business oriented production approach will obviously encounter risks. However, the
level of risks may differ from business to business. Most agri-business are vulnerable
mainly because of the biological nature of their production system which makes them
susceptible to natural changes such as weather, disease, pests, etc. Though small ruminant
production is one of the most profitable businesses in the agriculture sector, there are
various kinds of associated risks. The major risks associated with small ruminant
business are:
❖ Diseases
❖ Change of weather condition
❖ Market problems for inputs and outputs
The major risk emanates from disease hazards and these diseases are mostly contagious.
Once a disease event occurs, it is not only brings substantial physical loss of animals but
also a simultaneous loss of demand for the product because of consumer negativity
affecting tastes and product preference. Inputs for small ruminant businesses are labor,
feed and feed processing units, medicaments and others. A market should be available for
the inputs and for the outputs of the business, i.e., milk, crossbred and fattened live
animals. If there is time lag between demand and supply of products and importable

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inputs, the greater the risk for the business. In addition, during the dry season or if
drought occurs, the project could face feed shortages which can affect the project activity.
Instability of any kind may also disturb and have a negative consequent effect on the
implementation of this project. It may prevent the project from supplying products on
time and at the required quality as well as affecting marketing of the product to local and
export markets.

Exit strategies
In order to protect animals from possible diseases outbreaks, preventive measures should
be put in place through proper management such as supplying proper feed and clean
water and supplying veterinary services such as vaccination, medicaments and flock
monitoring. In order to supply necessary input at required times, the project management
will work hand in hand with the University Farm Management Department for supplying
feed and processing service, with the Veterinary Faculty to get timely surveillance and
professional support and with other departments of the University as needed. Production
activity will be based on an annual plan in such a way that there will be no time lag
between demand and supply of products. In addition, the marketing plan will be
developed based on market research. In order to avoid feed shortages during possible
drought periods, the project will have a reserve feed stock.
Financial analysis
Profit maximization is the overriding factor in most management decisions. Thus, an
economic profitability analysis is necessary to determine whether investing in a sheep
and goat production plan will result in profit in the long run. As a key component of a
business plan, budgeting is a management tool that helps the producer evaluate the
feasibility of a proposed venture and helps identify areas for improvement. Budgets can
identify the financial resources needed for both sheep and goat investment and annual
operating costs. Budgets can help managers make decisions based on realistic data.
Limitations in preparation of the budget:
❖ Budgets are generally constructed to reflect future actions and it is difficult to
accurately predict future prices and yields.
❖ Production and marketing risks will limit budget reliability. In spite of using
best estimates, variability in production and prices may bring changes in
budget estimation.
❖ Even under careful use, errors can compound themselves to the point where
budgets have little or no use.
❖ In the farm sector in general, and in livestock production in particular,
business plan decision making is complex. This is especially true when
planning small ruminant production. Usually, margins are meager unless and
until a strict regime is followed, i.e.,
➢ Detailed assessment
➢ Effective management
➢ Avoidance of loss, i.e. loss making determinants should be assessed at an
early stage to avoid major losses at a later stage.

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Materials and methods used for analysis

❖ Two alternative production systems of fattening and breeding are considered in
the project for both goat and sheep.
❖ Costs and returns for the two operations are calculated from biological and cost
and revenue estimates used in a separate manner.
❖ Biological parameters are estimated for flock fertility at eighty percent and kid
mortality at 9 percent.
❖ Fixed costs are estimated only for equipment and maintenance as the farms have
already been established.
❖ Under operating costs, the primary component is feed cost which has been
estimated separately for the fattening and breeding units. For breeding units, feed
cost is estimated for early pregnancy, late pregnancy, lactation and during the
open/dry period. In addition to this, a separate cost analysis is made for
Buck/Ram.
❖ Revenue estimates are derived mainly from sale of kids, ewe/does and culled
ewes/doe and buck/ram.
❖ Project worth analysis is estimated by analyzing cash flow estimates and Net
Present Value at 7.5 percent discount rate.
❖ The above procedure will be used for the breeding unit and the same can be
applied for preparation of a feasibility analysis report pertaining to the fattening
unit.
❖ The expected returns for the fattening unit are encouraging whereas those for the
breeding unit are below operating costs.
❖ Returns are not even sufficient to cover variable costs.
❖ The enterprise would not be self-supporting in the short run
❖ If breeding of small ruminants is for improving the livelihoods of vulnerable
populations, economics will play a lesser role in deciding whether to produce
small ruminants.
❖ Many organizations may sacrifice short run returns to achieve long term social
benefits.
❖ If it is viewed only as a profitable enterprise, the best decision may be to exit the
enterprise and employ the resources in a different enterprise or investment.
Project financial feasibility analysis
Financial feasibility of the goat fattening unit
Estimations are presented for a goat fattening unit for 150 goats. Four cycles of
fattening will be conducted annually for a total of 600 goats fattened. In order to
know the feasibility of investing in a goat fattening business, costs are estimated as
follows.

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Table 2. Estimated fixed costs for the fattening unit

No.
Description
Cost in ETB
1
Equipment & Machinery
50,000
2
Renovating of existing building
structure
50,000
3
Total
100,000
Table 3. Feed requirement and estimated costs per production cycle for fattening unit
No.
Concentrate Forage Total
Type of feed
Amount of feed required per goat per day
0.2
0.5
0.7
No. of goats per production season
150
150
Total feed quantity required per day
30
75
Total feed quantity required per production
season (90 Days)
2700
6750
Cost per Kg of concentrate and forage in
ETB
2.80
1.00
Total estimated cost in ETB
7, 560
6, 750 14, 310
Cost per unit of goat in ETB
50.4
45 90.40
Each production cycle is for three months (90 days)
Table 4. Human resource requirements for the fattening unit
Job Description
Supervisor
Accountant
Daily farm labor
No of Employees
1
1
4
Monthly Salary in
ETB
1, 500
500
450
Annual Salary
18, 000
6, 000
21, 600
Remark
One person will
be employed to
manage
all
activities
One person will
be employed to
manage
all
activities
Four persons will
be employed for
feeding, cleaning
and guarding.
Total expenditure
on all Labor per
Year in ETB
45, 600
Half of the costs are shared by the fattening unit. Hence share of expenditure for
fattening unit is 22,800 in ETB.

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Table 5. Operation cost estimates for goat fattening for one year
Cost per goat per
production Season
ETB
Total cost per
production
Season ETB
Total estimated
cost per Annum
ETB
Feed cost
90.40
13, 560.00
Labor Cost
56.00
8, 400.00
33, 600.00
Health Care
10.25
1, 537.50
6, 150.00
Machinery Rent
18.33
2, 750.00
11, 000.00
Purchase of goat
300.00
45, 000.00
180, 000.00
Marketing cost
15.00
2, 250.00
9, 000.00
Tax
12.60
1, 890.00
7, 560.00
Insurance
5.00
750.00
3,000.00
Miscellaneous
10.00
1,500.00
6,000.00
Total
517.58
77637.00
310548.00
Financial feasibility of the goat fattening unit
A number of methods are used to study the feasibility of a unit. The most widely used
statements are balance sheet, income statement and cash flow statement. Even among
these, there are a wide variety of costs and revenues at different stages to be analyzed.
But, in our project which is a restricted study, all assets are the livestock only and all
revenues are derived from the sale of these animals. Hence, there are only two items in
the present balance sheet.
1. Costs of all types
2. Revenues derived from the sale of animals.
Table 6. Balance Sheet projections
No. Assets
Liabilities
Net revenue
1.
600 goats @ ETB 650 = 39, 0000 310, 548.00
79, 452.00
❖ This particular balance sheet shows a surplus of net revenue equal to ETB 79,452.
❖ One another method is used to provide additional information on financial
progress, i.e. ratio analysis.
❖ The usefulness of ratios depends to a considerable degree on a reliable basis for
comparison. This will determine whether the ratio for a particular farm is good,
fair or poor. Here again, assets and liabilities are taken in terms of operating costs
excluding other fixed costs.
❖ A classical measure of financial condition used in balance sheet analysis is the
current ratio, which indicates the extent to which current assets, if liquidated,
would cover current liabilities.
❖ Current Ratio = Total Assets/ Current Liabilities
❖ Current Ratio = 390,000/310,548.00 = 1.26
❖ This ratio reveals that the current assets cover the current liabilities by 1.26 times.
Usually an ideal current ratio of two times or 2:1 is suggested in business which is

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ideal to manufacturing industries, but in businesses like livestock farms, it

depends on the sales generated.
❖ Higher ratios are always preferred.
Important terms
❖ Income Statement: An income statement is also a summary of receipts and
gains during a specified period, usually a year.
❖ Receipts: Receipts are derived from annual sales. Here, the only source of
revenue is through sales of goats.
❖ Expenses: All expenses involved in the operation of the business during the
year are considered. This includes fixed as well as variable costs.
❖ Net income: The difference between the receipts and costs is considered as
net income. For large enterprises, three types of income are considered. i.e.,
net cash income, net operating income and net farm income. In our study net
cash income is considered as ETB = 79,452.
❖ Income statement ratios: One of the income statement ratios is expense to
income ratio used to measure the input – output efficiency of the business, i.e.,
measure the margin by which the value of total production exceeds production
costs. Controlling expenses in relation to income is key to a profitable farm
❖ Operating ratio: Total operating expenses/Gross income
❖ In our present study, the operating ratio = 310, 548/390,000 = 0.80
❖ Total operating expenses amounted to 80 cents per birr of gross income.
❖ Fixed ratio: Fixed ratio = Fixed expenses/Gross income. Here it is
100,000/39, 0000 = 0.26. Fixed expenses amounted to 26 cents per Birr of
gross income.
❖ Cash flow Statement: It is all cash transactions affecting the business during
a year which is obtained by cash receipts minus cash payments. This source is
also limited, i.e., goats are sold after every quarter. Projections for this unit
equal ETB = 79,452.
❖ From all these statements, this unit is promising and hence we can start
establishing the unit.
❖ Assuming the costs of inputs and the market price of output will rise
proportionately through the project life, the project feasibility analysis is was
performed using a discount rate of 7.5 percent to analyze the net present value
of goat fattening project. Using the NPV criterion for an investment with an
objective of profit generation, a NPV greater than zero is acceptable. Since
NPV in our study is positive, this investment is acceptable.
❖ However, the project worth analysis for breeding unit is not so promising at
least for three years. The details of the breeding unit is furnished below

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Financial feasibility of the goat breeding unit

Table 7. Basic biological parameters for estimating costs and returns
Biological
parameters
Estimation Maximum Limit
Flock fertility rate
85 %
100
Kid mortality rate
9%
-
Operating costs are estimated separately for pregnant does, late pregnancy,
lactation period and the dry period. In addition, operating costs are separately
estimated for bucks and for kids.
Table 8. Consolidated summary of total feed costs for 215 goats and for 155 kids
No.
Feed cost for
200 Pregnant
Does
Feed cost for
15 Bucks
Feed cost for
155 Kids
Total costs
1.
50, 514.00
7, 172.25
17, 391.00 75, 077.25

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Table 9. Operating cost estimates for pregnant does

No.
Quantity Cost
per
unit
Feed
cost
per
goat
Total
feed
cost
for
200
goats
Total cost
for three
months
1. Feed cost
for early
pregnant
doe (ETB)
Concentrate
0.10 2.80 0.28
56.00
5, 040
9,540
Forage
0.25 1.00 0.25
50.00
4, 500
2. Feed cost
for Does
in
late
pregnancy
Total cost for two months
Concentrate
0.15 2.80 0.42
84.00
5040
Forage
0.25 1.00 0.25
50.00
3000
8,040
3. Feed cost
for Does
during
nursing
Total cost for four months
Concentrate
0.20 2.80 0.56 112.00
13, 440
Forage
0.25 1.00 0.25
50.00
6, 000
19,440
4. Feed cost
for does
during dry
season
Total feed cost for three months
Concentrate
0.15 2.80 0.42
84.00
7, 560
Forage
0.50 1.00 0.50 100.00
9000
16,560
5.
Feed cost
for bucks
15
Total feed cost for one year
Concentrate
0.20 2.80 0.56
8.40
3, 066
Forage
0.75 1.00 0.75 11.25 4, 106.25 7,172.25
6.
Total feed cost for does and bucks for one year
57, 686.25

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Table 10. Operating cost estimates for kid feeding for six months
No. Type of
feed
Quantity
Cost per
unit
Cost per
kid
Feed cost
for
155
kids
Total
cost
during
lactation
period of four
months
Feed cost during nursing
1.
Concentrate
0.05
2.80
0.14
21.70
2, 604.00
Forage
0.15
1.00
0.15
23.25
2, 790.00
2.
Feed cost during post weaning period, three months
Concentrate
0.20
2.80
0.56
86.80
7, 812.00
Forage
0.30
1.00
0.3
46.50
4, 185.00
3.
Total feed cost for 155 kids for seven months
17, 391.00
Table 11. Operating cost estimates for goat breeding unit for one year
Total No of goats Total cost for 200 goats
Purchase price of breeding goats
@ ETB300
200
60,000
Purchase price of breeding bucks
@ ETB 1000
15
15, 000
Labor cost for one year
215 + 150
22, 800
Health care for all goats@
ETB10.25 ( 215 + 155)
215 + 155
3, 792.50
Total Feed cost
215 + 155
75, 077.25
Marketing costs @ ETB 15 for
155 kids
155
2, 325.00
Miscellaneous expenses for all
goats
215 + 155
25, 000
Total expenses
204,148.00
Unlike the fattening unit, the breeding unit generates a small amount of revenue per
year. This is partly because there is only one lamb/kid crop per doe/ewe per year.
However, after five years when breeding does and bucks are sold, a substantial
amount of revenue can be generated. The main objective of this project is to help the
farmers by distributing high quality animals.
1. Costs of all types= ETB 204, 148.00
2. Revenue derived from the sale of 155 kids= ETB 93,000

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Table 12. Balance sheet projections

No Assets
Liabilities
1
155 Kids@ ETB 600 = 93,000
204, 148.00
2
A Deficit of ETB-111,148
---
❖ Current Ratio = Total Assets/ Current Liabilities
❖ Current Ratio = 93,000/204,148.00 = 0.46
❖ This ratio reveals that the current assets do not cover current liabilities.
❖ Operating ratio = Total operating expenses/ Gross income
❖ In our present study operating ratio = 204,148.00/93,000.00 = 2.20
❖ Usually this ratio should be as small as possible.
Due to the continuous deficit which has been estimated for the goat breeding unit, the
possible remedies to minimize the losses are:
❖ They are profitable if rangelands are sufficiently available.
❖ The only cost component is feed cost. If possible, make arrangements with the
legal pastoral land occupants for continuous supply of feed at a subsidized rate.
❖ Production can be improved by improvement in rangelands/cultivate pastures/
crop residue utilization.
❖ Introduce buy-back facilities involving local dynamic potential farmers in
arranging feed supply.
❖ Involve local villagers where 1-5 heads can be raised in intensive crop cultivation
areas.
❖ Improve overall, and particularly reproductive, management so that two crops or
at least three kids/two does in a year is possible.
❖ Keep labor and breeding does and buck costs under fixed costs. Furthermore, one
other possibility to make the unit as profitable as possible is estimating only feed
costs as operating costs with the rest of the costs as fixed costs. This would
provide a margin.
Conclusion
Based on the financial results from the two units, one of the critical components where
financial loss is occurring is the feed cost, which has a large influence on the performance
of the enterprise resulting in either loss or a small profit.
Possible remedy: Feed resources and feed management.
1. To make Haramaya University Sheep and Goat Production (HUSGP) a
sustainable unit, identification of feed production source is very important. The
availability of rangelands, which is around 62% of the total land area of the
nation, is an option for feed production. Involving the farming communities who
depend for their livelihood on these rangelands is a viable and good proposition.
2. Involve rural people in forage development by introducing training and assistance
by Haramaya University. One interventions of the university is to supply
strategically selected forage species with multiple uses (food, fuel and fodder)
which can withstand weather calamity.

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3. Technological support for the maintenance of traditional sustainable natural

grazing land used by the local community who can enroll as beneficiaries and
members of HUSGP for sustainable and improved rangeland management.
4. Encourage rural people to use genetically superior HU animals.
5. Training facilities must be extended to local farmers especially with high school
education level to train them in para-veterinary skills to handle emergencies.
6. Transfer improved management practices to farmers to improve their livelihood.
7. Organize women’s groups to form cooperatives with a common objective of
establishing sheep and goat farms. Provide them with training improved
management.
8. Encourage and promote the traditional sustainable natural grazing lands to support
small ruminant production by local community. This is a neglected sector in
animal production in Ethiopia.
9. Encourage successful rangeland development through interventions of
technically, socially and economically advanced skills.

Establishment and building of brand image

1. Establishment and building of a brand image is an important in making the sheep
and goat unit a sustainable business enterprise. This can be achieved by following
a strict regime of quality control and introduction of a wide variety of
standardization techniques and principles.
2. Use an awareness campaign focusing on the safety and nutrient content of small
ruminant meat, e.g., low cholesterol, low sodium, etc.
3. Slaughtering of animals in a modern and scientifically designed abattoir can add
to the establishment of a brand image.
4. Sales promotion through establishment of a logo to avoid imitation, tamper-proof
and attractive packaging should make customers aware of the benefits of quality
and the unique value linked with the product. Advertising as a sales promotion
tool to establish brand image is very important.
5. Finally, once the brand name is established there will be assured demand with a
commanding price with cascading results beneficial to all stakeholders.
6. Two crucial aspects, cost minimization and revenue maximization, are the two
components for the success of any enterprise from an economic point of view.
Note: Financial feasibility analysis for the sheep farm is similar to the example
demonstrated above for the goat farm and can be calculated by adjusting cost and
revenues pertinent to sheep fattening and breeding.