IRISH POTATO2016

FARMING
Business plan

Author: Rotich Enock

Date: 10/15/2016
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CONTENTS

1. Executive summary

2. Operational plan
Production requirements and conditions
Location
Personnel
Suppliers
Credit policies

3. Marketing plan
Industry analysis
Target market/customers
Competition
Anticipated challenges
9-month sales forecast

4. Financial plan
Start-up requirements
9-month profit and loss projection
Cash flow statement

5. Appendices
Market research studies
Farmers experiences
Common challenges faced by farmers

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1. Executive summary

This will be the first tomato farming project and will involve the establishment of two
greenhouse tunnel on a freehold piece of land in Kericho.

Greenhouse farming is a modern way of growing crops that involve the growing of crops
in an artificially controlled environment that ensures reduced susceptibility to diseases
and increased yield of crop. Plants are fed nutrients through a drip irrigation system and
they are grown in the most suitable conditions, which allow each plant to produce the
maximum fruit possible.

The greenhouse method of farming will have the following advantages:

High tomato yield
Reduced disease attack
Reduced labour costs since operating the system is not labour intensive.
Consistent production of the crop irregardless of the prevailing season
Uniformity of crops in terms of size and quality

The demand for tomatoes has been and still remains high in the country due to the fact
that most Kenyan families use tomatoes as a basic ingredient in most of their meals.
Tomato growing using greenhouse technology is steadily picking up in the country. The
customers for our products will include the following market segments in Kericho and its
environs:
Hotels, eating joints and lodgings
Open air Markets
Supermarkets
Schools and colleges
Groceries and independent retailers
Customers buying from the farm

The total project will cost a sum of Kshs 114,000. Operations is intended to start in the
month of June 2016 and begin making sales by mid august or early September. In order
to ensure continuity of supply, an additional greenhouse will be put up before the first
crop dies out. This will ensure that there are no gaps in supply which leads to loss of
customers.

2. Operational plan

Production

The tomatoes will be grown in two low cost greenhouse tunnels; one measuring 8x30m
and the other one 8x15m. Hybrid seeds, agro-chemicals and fertilizers will be obtained
from Royal seeds Kenya.

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The 8x30m greenhouse will have the capacity to produce approximately 9,000 Kgs (9
tonnes) of tomato in one season if proper management is put in place. The 8x15m
greenhouse has a capacity to produce 4500-5000 Kgs.

Production Requirements and Conditions

The tomatoes will be grown following recommended conditions and fertilizer regimens.
i) Temperature: The optimum temperature for most tomato varieties lies between
21 and 24 C. Tomato plants react to temperature variation during the growth
cycle (see Table 1), for seed germination, seedling growth, flower and fruit set and
fruit quality. If cool or hot weather spells persist during flowering, pollen
production will be low. This will influence fruit formation.

Stages Temperature ( C)
Min. Optimum range Max.
Seed germination 11 16-29 34
Seedling growth 18 21-24 32
Fruit set 18 20-24 30
Red colour development 10 20-24 30

ii) Soil: Tomatoes prefers deep, well drained, sandy loam soils. Soil depth of 15 to
20 cm is needed to grow a healthy crop. Deep ploughing allows better root
penetration. Tomato is moderately tolerant to a wide range of pH (level of
acidity), but grows well in soils with a pH of 5.5 6.8 with adequate nutrient
supply and availability.

iii) Transplanting: Transplant the seedling to the field 3 to 6 weeks after sowing. A
week before transplanting, seedlings should be hardened by reducing the
application of water, but 12-14 hours before they are taken out of the seedbed they
should be thoroughly watered again to avoid excessive damage to the roots.
Seedlings of 15-25 cm tall with 3-5 true leaves are most suitable for transplanting.
Transplanting should be done in the afternoon or on a cloudy day to reduce the
transplanting shock. Water the plants immediately once they have been
transplanted. When removing the seedlings, keep a large clump of soil attached to
the roots to prevent them from being damaged. Spacing of 60x45 cm should be
observed. Press the soil firmly around the root, and water around the base of the
plant to settle the soil.

iv) Fertilizers and Manures: Horse manure has the best balance of nutrients. Cow
manure has relatively little phosphate. Pig manure is usually rich in mineral salts
but has relatively little potassium. Manure from goat and sheep is also good
organic manure. Poultry manure is usually three to four times as strong as
farmyard manure. It is a very valuable kind of manure as plants can easily absorb
the nutrients from it. It is also suitable for acid soils because it contains a lot of
calcium (alkaline). It is important to have manure that is well decomposed, and
which is not too sticky or too wet.

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 Chemical fertiliser (except for calcium) does not improve the soil structure but
enriches the soil by adding nutrients. Before planting, the soil is fertilised by
applying organic matter. Tomato is usually given a combination of organic and
chemical fertilisers. Foliar application of nutrients (i.e. to the leaves) is advisable
to improve the yield.

Location

The farm will be located in Kericho on a freehold piece of land. The said piece of land
has access to reliable supply of piped water necessary for irrigation and is easily
accessible to the main road (Kericho-Kisumu highway) thus ensuring that produce will
easily be delivered to the market.

Personnel

Tom will act as the project manager who will be responsible for overall management.
Nakuk will assist in the day to day operations of the green house. The work involved is
not labour intensive and therefore only one employee is required. Tom will oversee the
project, maintain proper records and accounts and ensure the produce is effectively
marketed. Nakuk will be given the necessary training to competently carry out the
operations. In addition, a comprehensive schedule and written procedures will be
prepared in order to guide the employee on the procedures. This is important in case of
any chance of forgetfulness.

Credit policies

Some of our sales will have to be credit sales. Sales to supermarkets, schools and some
hotels will have to be credit sales due to the purchasing policies of such customers.

The credit period will be the subject of agreement with the individual customers and will
not be a blanket predetermined period. However, we will set our maximum repayment
period at one month in order to ensure proper cash flow. Before taking on any new credit
customer, we will first establish their credit-worthiness. This will be done by consulting
with their suppliers for other products to establish their repayment history. If we establish
a healthy payment history, we will then agree on the payment terms.

We will also factor in the cost of extending credit into our prices.

3. Marketing plan

Marketing will be one of the major pillars of this venture. Having quality products is
meaningless if the product is not bought by customers. Immense emphasis should
therefore be put on marketing and selling of the product. A proper market research will be
carried out in due course.

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Industry analysis

Most of the regions in Kenya produce tomatoes which are marketed in the local markets.
The produce marketed in the bigger cities that is Nairobi, Mombassa, Nakuru, Kisumu,
Eldoret and other major towns are sourced from Kirinyaga district ,Meru central, Nyeri
District, Nakuru district, Taita Taveta District, Eldoret and western Kenya.

The South Rift region does not produce as much tomatoes and therefore the demand is
sufficient. The demand for tomatoes has been constant because it is indispensable in a
majority of Kenyan meals-most families use tomatoes in at least two meals every day.

Customers

The market for tomatoes is segmented into the following main categories of customers:

Schools and universities

There are many schools and colleges in Kericho that will provide a good
market for our products. These include Kipsigis Girls, Kericho High, Moi Tea,
Kaptebeswet, KTTC etc.
Supermarkets
Supermarkets in Kericho Town include Nakumatt, Ukwala, Stagemart and
Tuskys.

Open air Markets

Selling at markets is best done through agents. There are a number of markets
where we will be able to sell our products: Kericho town market, Kapsoit
market, Kapsuser market etc
Independent retailers and groceries
We will also target retailers by emphasizing competitive pricing and consistent
supply of tomatoes.
Customers buying directly from the farm
Experience has shown that the number of customers attracted by selling direct
from the farm is quite considerable. This method of selling involves lower
prices since there are no extra costs and these lower prices attract quite a
number of customers.
Hotels, lodgings, eating joints
This is one of the best market segments. The demand for tomatoes by high-
end hotels, middle class restaurants and backstreet eating joints is phenomenal
and is bound to ensure that our produce sells well.

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Competition

There are a few tomato farmers in the region. Most are farmers planting in open fields
where they are affected by both rains and diseases. The competitive advantage of the
greenhouse is its ability to produce quality tomatoes all year round.

Anticipated challenges

The production stage is expected to be generally hassle-free. The main challenge

anticipated is in the marketing stage. This is especially so during seasons when tomatoes
flood the market. We will try to counter his by building concrete relationships with our
clients, emphasizing our competitive advantages and concentrating on aggressive
marketing. It will also be difficult to determine these bountiful seasons because of current
erratic weather patterns.

Sales forecast

Jun Jul Aug Sept Oct Nov Dec Jan Feb Total
Unit sales
Total
1.6tons 2 ton 2.5tons 2.5tons 2ton 1.4tons 12 tons
unit nil nil nil 25crts 31crts 39crts 39crts 31crts 22crts 187crates
sales

Unit prices per crate (Kshs) Based on low season

- - - 2,500 2,500 2,500 2,500 2,500 2,500 -
Sales (Kshs)
Total
nil nil nil 62,500 77,500 97,500 97,500 77,500 55,000 467,500
sales

Notes

We will not make any sales in the months of June, July and August as the crop
will not have matured. Harvesting begins 3 months after planting and we
therefore expect our first sales from mid August to early September.
Production of tomatoes varies from month to month depending on the stage of
growth.
1 crate of tomatoes weighs 64 Kgs. Tomatoes are sold either in crates or in
Kilograms. We will use both of these units in order to maximize profits.
The sales forecast covers a period of 9 months since this is the seasonal duration
of one crop.

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4. Financial Plan

.Start-up expenses

Material Quantity Cost

1 13 feet (4m) Corner Posts 4x2
2 13 feet (4m) Side Posts 18 x 2
5000
3 18 feet (5.5m) King posts 11 x 2
4 Struts Many
5 Nails Assorted 1000
6 200 micron greenhouse cover 50000
7 Insect netting 10000
8 Waste oil - 0
9 Black Wrapping paper - 1500
10 Drip irrigation system 250 m2 19000
11 Disinfectant 1L 500
12 Barbed wire 10Kg 2000
1000 Chonto and 500
13 Seedlings 11600
Bravo seeds pack
14 Soil analysis - 4000
15 Fertilizers/Manure + Agrochemicals 10000
TOTAL 114,000

Income Statement
The following is a projected income statement for the first season of business. It is based
on the sales forecast
Pro Forma profit and loss statement for the first season of business

Sales 467,600
Less Cost of inputs 114,000

Gross profit 353,600

Less operating expenses:

Wages (Nakuk) 50,000
Transport expenses 20,000
Management & promotion expenses 10,000
Depreciation 5,000

Total Operating expenses 85,000

Net Profit 268,600

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Projected cash flow
The following table is the projected cash flow for the first 12 months:

Pro Forma cash flow

Jun Jul Aug Sep Oct Nov Dec Jan Feb
Cash received
Cash introduced 114,000 80,000
Sales nil nil nil 62,500 77,500 97,500 97,500 77,500 55,000
total cash
0 0 0 62,500 77,500 97,500 97,500 77,500 55,000
received

Expenditure
Wages 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Transport - - - 3,000 3,000 3,000 3,000 3,000 3,000
Management &
promotion 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
expenses
Total cash spent 6,000 6,000 6,000 9,000 9,000 9,000 9,000 9,000 9,000

Net cash flow (6,000) (6,000) (6,000) 53,500 68,500 88,500 88,500 68,500 46,000

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5. Appendices

A) Market research studies

In order to effectively determine who the customers would be, the size of our market and
whether our products would be marketable, a market research in Kericho and its
environs. The study will be designed to elicit the following information:
Who will we sell our produce to?
Is there sufficient demand for tomatoes in the region?
Who is our competition and how can we beat them?
Will our produce be marketable?
Will our business be profitable?
The study will be undertaken through interviews and site visits.

B) Farmers experiences

These are some experiences some farmers face while undertaking greenhouse tomato
farming.

Please don't believe the information that you see out there in impressive brochures by
greenhouse sellers (ati 40Kes/Kg farm gate). That is on a very good day (and they are not
many).

Production - Have your guy trained by some professionals in the field. Make sure they do
what they are supposed to - if its spraying, applying fertilizers, watering schedule, top
dressing e.t.c. Please try and keep insects away at whatever cost. They can make or break
you. Make sure you have a constant supply of water (one way or the other). Do a soil and
water test, it will save you alot in future.

Harvesting The period can be as long as 8 months to as low as 3 months. Depends on

how well you take care of your plants.

Marketing - Either do your own marketing, in which case you need a vehicle for ferrying
produce, or have some agent come and get the crops at some ridiculous price. Obviously,
if you are marketing yourself, you get more money, but with more hustle. Keep abreast
with market prices. There was a week a crate was going for 2800, it rained a little, and the
same crate went for 3600 after 3 days. Taking to the soko is hasara if you don't have big
quantities. Those mamas for the soko will frustrate you thoroughly. Try and avoid going
to the market, but sell to end users or retailers: those mama mbogas, restaurants, e.t.c. you
can get up to 50% more by right market targeting. Even if you have people coming to the
farm, they will also frustrate you at times, especially when they know you are dependent
on them. I know someone who opted to feed his cows rather than sell at 10/kg, yet retail

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price is about 60/Kg. Something always goes wrong at one point. Try and look for a
solution.

Personnel: Get a trustworthy guy, who will not sell your produce when you are busy
working. Fire and hire as many times as may be necessary, until you get the right person.
Always conduct interview first before giving someone the job. This guy is a deal breaker.
It helps if you are staying within the farm, or have someone who can run the farm and
stays in it.

I still wonder how people farm on those 8x15m Greenhouses for commercial purposes. If
you want it to make sense, go for the bigger sizes, e.g. 8x30m - then you have some
economies of scale.

Depending on area, you will face other challenges. For example, I planted during rainy
season, and the roads there are near impassable if it rains. We had to transport a lorry of
manure by wheelbarrows a distance of about 200m, because the lorry got stuck in mud.
Even a tractor got stuck in the same mud. Its in such times that you question what you
are doing, and whether its all worth it.

If you get production, personnel and marketing right, then you are onto something. Forget
about those spreadsheets that say you return your money in 6 months. That is hogwash.
Give it 1.5-3 years for it to start generating money for you.

This is a high CAPEX, low OPEX business if you can get 80% of it right. Its quite
challenging doing it remotely (I go to farm twice a week, but its doable).

C) Common Challenges faced by farmers

Despite the benefits of greenhouse technology, most farmers face numerous challenges.
They include:

i) Temperature and Humidity

Many farmers fail to get good profits from greenhouse crops because they cannot manage
the two important factors that determine plant growth and productivity. Greenhouse
temperatures below 13 degrees Celsius and above 30 degrees Celsius in the case of dry
air or higher than 30 to 35 degrees Celsius in cases of high air humidity affect growth and
productivity of most crops. The optimal temperatures for production of greenhouse
tomatoes, pepper and eggplant should be 15 to 30 degrees Celsius and not beyond 35
degrees Celsius.

The temperatures should be maintained at around 16 to 30 degrees Celsius during the day
and 13 to 18 degrees Celsius during the night.

Some tomato farmers close the greenhouses the whole day without ventilation resulting
in excessively high temperatures beyond 40 degrees Celsius that lead to reduced

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performance of the crops. Generally, small-scale greenhouses are prone to overheating
when the sun is too hot.

Farmers should, therefore, open the doors and sides of the greenhouse from 8am to 5pm
for ventilation and close them at night to reduce heat loss. Greenhouses with only insect
nets on the walls are unsuitable for areas with low temperatures like the highlands of
Kericho, Mau Narok, Molo and Mt Kenya regions but may have positive effects in hot
and warm areas such as Mombasa, Kitui, Kisumu, Machakos and Garissa. Ideally,
farmers should have a thermometer for measuring temperature inside the greenhouse for
effective management.

High relative humidity resulting from crop transpiration, water evaporation from the
humid soil or other growing media and condensation of water vapour on the different
greenhouse surfaces is another challenge.

Relative humidity above 80 per cent coupled with high temperatures increases incidences
of bacterial and fungal diseases like bacterial wilt and botrytis (gray mold) while
greenhouse conditions with relative humidity below 60 per cent and high temperatures
create favourable micro-climate for rapid multiplication and development of mites and
insect pests.

Humidity in the greenhouse should, therefore, be regulated by ensuring adequate

ventilation, maintaining high temperatures at night, using plastic mulching on planting
beds and avoid wetting of the greenhouse floor.

ii) Loss of Soil Fertility

This is a common problem as most farmers plant one crop continuously without rotation.
This can be overcome by rotating crops, for example growing onions or melons, pepper
or eggplant after tomatoes and the use of both organic and inorganic fertilisers to
replenish soil fertility.

Farmers can also replace greenhouse soil by bringing quality soil from outside. Adopt the
technology of growing crops in pots or soilless cultures. The soils when used
continuously with same crop will have a buildup of diseases, especially bacterial wilt,
bacterial canker, fusarium and verticilium wilts.

Greenhouse farmers are, therefore, encouraged to treat the soil by sterilisation,

solarisation or fumigation using fumigants such as Dazomet, Metam Sodium and
Chloroptin.

Greenhouses get contaminated by people visiting the structures or by use of infected

planting material, water and farm tools. Have a footbath at the entry.

iii) Lack of Quality Water Sources

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Many parts of the country are deficient of good water sources and rivers or boreholes
may also be absent. In addition, available water could be saline, chlorinated or
contaminated with diseases like bacterial wilt, hence it is of poor quality.

Contaminated water is common in areas where farmers in sources of water plant crops
like potatoes, tomatoes and water flowing downstream is collected by farmers for
greenhouse farming. This introduces bacterial wilt in greenhouse tomato.

iv) Pests and Disease

Management of insect pests and diseases is the biggest challenge in greenhouse farming.
This depends on the type of the crops that are planted. However, generally, pathogens and
insects can be established in a greenhouse very fast. They are very difficult if not
impossible to get rid of effectively. For greenhouses that are covered with plastic, the use
of ultraviolet-absorbing plastics can reduce insect problems.

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