Egg Production and Consultancy Services
Poultry farming comes with a variety of niche where one can invest in and make tremendous return on investment. Poultry Handlers Limited is looking forward to tap several poultry niche so as to tap a wider market and thus high returns Thorat and Vahora, (2015). The company will mainly venture in Egg Production but will also provide Poultry Consultancy services in regards to Egg production as well as well as meat production from the birds that will be over 100 weeks (2years) of laying, Dr.R.Harilal and Dr.T.Padma (2012)
Egg Production is the most common niche ventured in under poultry farming because egg consumers are numerous and thus readily available market. For the case of this business they will concentrate with rearing Chicken also known as the domestic fowl and not any other type of bird that can be reared under poultry farming. For egg production Layers are preferable. Poultry handlers have a target to handle 2500 chicken capacity for the 1st year, 5000 in the second year and 5000 in the 3rd year. Ghandour (2014)
Apart from egg production being the most common niche Poultry handlers has opted for this venture because among the staff (work force to be deployed) there are specialist who will give the best advice on the procedures and methods to be followed. Apart from this benefit that will be accrued in-house, Poultry handlers will also provide consultancy services that will generate more revenue to the company and thus boost profit, Kadam (2017)
It is estimated that past 2years of laying, productivity for the layers will have reduced and thus will be used in meat production as another source of income.
Poultry handlers limited will start as a sole proprietorship business.
To be a reliable high quality egg producer.
To remain profitable in business and to the society through provision of employment and quality goods and services.
The main objective of the business is to make profit and be of value to both the owners, consumers’ and the society at large.
The business also has an aim to grow and venture into the remaining poultry niche it has not tapped such as Poultry feed production, poultry marketing, chicken breeding and Poultry machine and equipment manufacturing.
The poultry farming industry is generally a multimillion business venture and is growing day in day out. This is promising to poultry handlers as it is a sign that the investment is worth their resources time and efforts. The industry benefits more from the fact that campaigns are advocating for more intake of chicken and eggs as a good source of proteins, Digal (2010). This is in itself self-advertising and thus they can enjoy an already available market. Wehinger (2009)
Market Selection and Segmentation
Despite the industry being a multimillion investment there are challenges that are faced in this industry. The challenges include:
- It is an attractive venture and it is obvious that it will attract the eyes of many. Competition means limited market or high marketing cost which lowers the profits made, Banahene (2010)
- Poultry industry has a long payback period. This means that investors should have huge amounts of capital to sustain the investment before it yields outcomes to sustain itself.
- Poultry industry is also labor intensive investment.
- Because of the long payback period, poultry industry requires high startup capital which maybe a challenge for beginners joining the industry, Bessler and Schneck (2016)
- The birds are always very sensitive to environmental changes and disease outbreak poses a great and major challenge to the loose of the birds especially the domestic fowl.
- Vaccinations are available against diseases but they are costly which further increases the cost of operation.
Despite the availability of market as stated above, poultry handlers will have to identify a particular market segment that they can rely on. Market selection is important because it will be easy to predict how much will be consumed and at what time. This will ensure that there is no over or under production that may cause shortage and thus loose of profits or overproduction that will lead to losses due to expiry of the products (eggs and chicken meat) Pan (2012)
Market selection should go handy with segmentation. Segmentation allows the investor to understand the different needs in the different segments which ensures specific attention is paid to the consumers. Segmentation can also allow for different pricing among the segments depending on income of consumers which ensures high sales and high profits. Karlsson and Honig, (2009)
The target market is one of the key considerations in the location of the firm. The firm is to be located in a densely populated area which will ensure direct access to the market with minimal transportation cost.
The Company will also target restaurants, Schools, Pubs, chicken distributors, slaughter houses and major offices around the business that have a large number of employees.
Segmentation of the target market is an important aspect in an attempt to understand the different client needs among different segment as well as their ability to purchase as per their income level which will greatly help in pricing, Howell (2011)
- The main marketing strategy the business is planning to employ is by creating links with big restaurants, chicken distributors and slaughter houses. This will ensure a stable clientele base and thus controlled production.Ogunnaike, (2014)
- The business is also planning to make use of fliers and brochures which will be circulated by their employees to create awareness of their existence in the area.
- The use of proper packaging and design is also a method the company is planning to employ as a marketing strategy. It believes that attractive packaging design will be eye catching. This will create awareness of their business and thus a huge client base, Briukhanov and Gaas (2016)
- The business also plans to identify a centralized place which will be more convenient for customers. The place to be selected should be centralized location, accessible to every customer. The channels for distributing the products that the company will have to select should be the most efficient one, which will allow for easy transportation of the products to end users when need be. The logistics arrangement should also be put in to consideration to ensure all transportation services offered, fully satisfies the customers.
- The business is also planning to set a list of prices for the products and also offer discounts and allowances to its customers.
Operations Plan.
Key Operating Activities.
- Working hours is an important aspect to the business. The business will be operating for 6 days a week for at most 8 hours a day. The business will also receive emails and calls anytime of the week from customers.
- Delivery on time also is a key operating activity the business has factored in. The business will be prompt in order processing and aims to make deliveries customers for at most two days if the order is not very urgent and at least 6 hours for urgent orders.
- Marketing is an important aspect to the survival of the business. The business will be involved in regular marketing activities to create awareness of its operation and also to attract new customers.
- Benchmarking is also an important business aspect which will enable the business to keep track with competitors and remain at par with competitors in the industry.
The business is optimistic with its operation and anticipates for business growth and expansion. The business is well set to meet unplanned for demands or cater for emergency situations.
The manpower at hand at a time is always more than enough to make sure that one is on standby to work on any demand that may arise unexpectedly. The poultry house capacity is also big enough to ensure that more domestic fowls can be added in between operations to meet the growing demands.
The business also owns more than enough land that can accommodate more structures in case of growth.
Financial wise the owners of the business are set to add $80 equity to the business to boost business activity in order to meet any growth needs or demands in the business.
Poultry handlers limited will be governed by 2 managers who are also the owners of the company and are the ones who will be providing the consultancy and accounting services in the Company, Curseu (2015)
Target Market and Location
The managers will be hiring employees as per need basis that is depending on the workload which will be determined by the number of chicken reared in a particular season. The number of employees is expected to range between 5 to 20 employees, Foster and Washington (2009)
The employees will be reporting to one senior employee who will be a link between his fellow employees and the managers, Prawitz and Cohart (2016)
This sector deals with the projected cash outflow on expenditures as well as the cash inflow from revenue generated.
The business is expecting to raise the initial startup capital which is estimated at $60,000 from the two owners of the business. It will thus be financed through owners’ equity which is expected to be repaid in full by the end of the 1st year. Afterwards the business is expected to be self-sustaining and finance itself. Velez-Pareja (2010)
To start the operation the following input items should be available and the estimated cost for year one as below.
|
ITEM COST |
|
· Machinery and equipment (e.g Lighting system, Egg tray, Feeders etc.) $ 200 |
|
· Construction of Chicken poultry house $ 200 |
|
· Manpower ( 4 employees @ $200 a month) $ 9600 |
|
· Cost of buying chicken (2500 @ $2 each) $ 5000 |
|
· Borehole $ 20 |
|
· Delivery Van $ 650 |
|
· Staff House $ 100 |
|
· Chicken food (2500bags a month @ 20 per bag) $ 6000 |
|
· Marketing $200 |
|
· Miscellaneous $ 200 |
|
Vaccines $500 |
|
Land &30,000 |
|
Total Cost Year 1 $ 52,670 |
It is expected that each chicken will be laying at least 2 eggs per day. The selling price per egg will be $0.1. The chickens are expected to lay eggs after approximately 6months from the purchase date.
The company also expects two get at least 2 consultancy jobs per month in year one. Of which they will be charging $50 per job.
- Sale of eggs (2*183*2500*0.1)
That is 2 eggs per chicken for 183days in a year multiplied by the number of chicken in year 1 (2500) multiplied by the selling price per egg $0.1
Revenue from eggs $91,500 for year 1.
- Consultancy (2*12*50)
Two jobs in a month, multiplied by 12months in a year times the cost per consultancy job.
Revenue from Consultancy $ 1200
- Unutilized amounts from owners’ equity ( cash at bank)
= 60,000-52,670
= 7,330
Total cash available after year 1 operation is equal to: $ 91,500 + $ 1,200+7330 = $ 100,030.00
From year one it is clear that the business will be able to repay the initial invested of $60,000 and still generate a profit of 40,030.
Year 2 Cash flows. (Total number of chicken 5000+ 2500)
Year two expenses will be financed from the cash available from year 1 operation of $40,030.
Man power (12 employees @ $200 Per Month) $2,400
Cost of Buying Chicken (5000chicken @ $2) $10,000
Chicken Food (7500bags per month @20 per bag) $18,000
Marketing $500
Vaccine $1500
Expansion of Poultry house $ 400
Miscellaneous $500
Delivery Van $650
Operations Plan
Total $ 33,950
It is expected than the number of consultancy jobs will double to 4 due to publicity and referrals from existing clients. The cost charged will remain as $50.
Revenue from consultancy. (4*12*50)
4 jobs per month multiplied by the total cost per job $50 for one year.
Total Cash inflow from consultancy =2400
Revenue from sale of eggs.
First 6 months of the year (2500*2*183*0.1)
2500 Chicken multiplied by 2 eggs per chicken a day times 183 days multiplied by the selling price per egg $0.1.
Cash Inflow from sale of eggs 183 days = $91,500
For the remaining 183 days (6months of year 2) 7500*2*183*0.1
Both chickens reared from year 1 and 2 will be laying eggs thus total number will be 7500 chickens multiplied by 2 eggs per chicken per day times 183 days times the selling price of $0.1 per egg.
Cash inflow remaining 183days = $ 274,500
Sale of year 1 Chicken.
At the end of year 2. The 2500 chickens from year 1 are expected to be sold at $1.5 per chicken.
Revenue from this sale is equal to (2500*1.5 = $3750)
- Cash at bank from year 1 operation = 40,030-33950= $6,080
Total Cash available after year 2 operation = 274500 + 91500 +2400+ 3750+6080
= $378,230
Just as year 2, year 3 will be financed by cash at hand or in the bank after the end of year 2 operation.
Cash Outflow
Man power (20 employees @ $300 Per Month) $7200
Cost of Buying Chicken (5000chicken @ $2) $10,000
Chicken Food (10,000bags per month @20 per bag) $24,000
Marketing $10,000
Vaccine $200
Miscellaneous $10000
Staff House $200
Total $ 61,600
Cash Inflow year 3.
Sale of Eggs.
First 183 days. (183*5000*2*0.1)
= $183,000
Remaining 183 days. (183*10000*2*0.1)
=$366,000
Sale of year 2 Chicken at $ 1 per chicken.
5000*1 = $5,000
The number is expected to remain at 4 consultancy services per month and the cost to increase to $55
(4*55*12 = $ 2,640)
- Cash at bank after year 3 expenditures.
=378,230-61600
= 316,630
Total cash from operations after year 3=18300+ 366,000+5,000+2,640+316,230
= $ 872,870.00
Note:
Apart from the expected expenses an overall expected loss of $300 will be provided for loss of chicken or egg breakage during transportation or harvest.
The two directors are also to share 50% each of the profits made in the 3 years
Thus Over ally:
Provision for losses for the 3 years 300*3=900
Cash Available =872,830-900
=$ 871,930
Directors pay 50% * 871,930
Financial Plan
= $ 435,965
Total Profits made: 435,965
It can be said that from the projections made on cash inflow and outflow the venture is viable as it will still have residual amounts after all the expenditures expected in the 3 years have been incurred.
The business is expected to experience some risk factors that the company has tried to mediate.
One risky factor is the possibility of disease infestation. This has been mediated through the use of vaccines to prevent virus spread and most importantly virus prevention. The employees have also been trained on proper hygiene mechanisms to avoid any exposure diseases outbreak, Cao and Yu (2014)
The other risk the business might be exposed to is the lack of a ready market for its products. This is a danger as it might lead to losses as a result of rotting of the products. The business plans to look for a strong clientele base to avoid occurrence of such a misfortune, Paul, Sarker and Essam (2015)
The Business may also be faced by the risk of cut throat competition either directly or indirectly. This can be mediated by the business benchmarking its competitors operation to get a gap that can give them a competitive advantage. This can also be mediated by ensuring that high quality goods and services are offered to ensure that clients are not lost to competitors due to professional negligence, Chawla (2015)
Before the launch of the operations the business should ensure that it has all the structures in place that is the workers house and the poultry house. The business also aims to ensure that all the equipment necessary to run the operations and activities are available 1 month prior to the launch to avoid any destruction after commencement of business, Fong (2012)
Employee training and awareness is another milestone the company has in mind to achieve before business commencement.
In case the actual outcome comes short of the expected outcome, the business opts for two exit strategies. The business will either be liquidated by selling the available assets and stock at a throw away price to avoid any further losses in its operation, Chen (2009)
The business can also opt for a merger or acquisition from another company in the same industry so as to continue with its operation under a new form rather than closing it down.
References
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