Sample Poultry Farming Business Plan

Poultry House Farming CC

CONTENTS

ABBREVIATIONS
EXECUTIVE SUMMARY
OVERVIEW
THE BUSINESS OPPORTUNITY
THE MARKET
THE TARGET MARKET
THE COMPETITION
THE COMPETITIVE STRATEGIES
THE MANAGEMENT TEAM
THE FINANCIAL PLAN
PURPOSE OF THE BUSINESS PLAN
1. PROJECT SUMMARY
1.1 PROJECT NAME
1.2 PROJECT LOCATION
1.3 PROJECT SPONSOR
1.4 PROJECT GOALS AND PURPOSE
1.5 PROJECT SCOPE
1.6 METHODOLOGY AND APPROACH
1.7 PROJECT SCHEDULE
2.0 EXTERNAL ENVIRONMENT ANALYSIS
2.1 POLITICAL CHANGES
2.2 ECONOMIC CHANGES
2.3 SOCIAL CHANGES
2.4 TECHNOLOGICAL CHANGES
2.5 ENVIRONMENTAL CHANGES
2.6 LEGISLATIVE CHANGES
3.0 INDUSTRY ANALYSIS
3.1 INDUSTRY OVERVIEW
3.2 INDUSTRY SIZE
3.3 GROWTH RATE
3.4 GROWTH POTENTIAL
3.5 PLAYERS IN THE INDUSTRY
3.6 KEY SUCCESS FACTORS
3.7 SUPPLY CHAIN MAP
3.8 SOUTH AFRICAN POULTRY INDUSTRY IMPACT ON SADC COUNTRIES
3.9 EGG PRODUCTION IN IEC COUNTRIES
4.0 MARKET ANALYSIS
4.1 MARKET SEGMENTATION
4.1.1 INDIVIDUAL CONSUMER MARKET SEGMENTATION
4.1.2 CORPORATE SEGMENTATION
4.2 NEEDS AND PREFERENCES OF THE IDENTIFIED SEGMENTS
4.2.1 NEEDS AND PREFERENCES CONSUMER OR INDIVIDUAL SEGMENT
4.2.2 NEEDS AND PREFERENCES - CORPORATE SEGMENT
4.2.3 SEGMENT ATTRACTIVENESS
4.2.4 PROPOSED TARGET MARKET
4.3 COMPETITION ANALYSIS
4.3.1 DIRECT COMPETITION
4.3.2 INDIRECT COMPETITION
4.3.3 INTENSITY OF COMPETITION
4.3.3.1 THREAT FROM NEW ENTRANTS
4.3.3.2 THREAT FROM CUSTOMERS
4.3.3.3 THREAT FROM SUBSTITUTES
4.3.3.4 THREAT FROM SUPPLIERS
4.3.3.5 INTENSITY OF RIVALRY
5.0 INTERNAL ENVIRONMENT ANALYSIS
5.1 SHARED VALUES AND PRINCIPLES
5.2 UNDERSTANDING OF THE STRATEGIC PLANNING PROCESS
5.3 ORGANISATIONAL STRUCTURE
5.4 LEADERSHIP STYLE
5.5 STAFF REQUIREMENTS
5.6 SKILLS AND COMPETENCIES
5.7 SYSTEMS
6.0 SWOT ANALYSIS
6.1 STRENGTHS
6.2 WEAKNESSES
6.3 OPPORTUNITIES
6.4 THREATS
7. STRATEGIC INTENT
7.1 VISION
7.2 MISSION
7.3 VALUES AND PRINCIPLES
8.0 PROJECT STRATEGIES
8.1 LONG TERM STRATEGIES
8.2 MEDIUM TERM STRATEGIES
8.3 SHORT TERM STRATEGIES
8.3.1 FINANCIAL STRATEGIES
8.3.2 MARKETING STRATEGIES
8.3.3 OPERATIONAL STRATEGIES
8.3.4 HUMAN RESOURCE STRATEGIES
9. IMPLEMENTATION PLAN
9.1 ORGANISATIONAL STRUCTURE
9.2 MANPOWER REQUIREMENTS
9.2.1 MANPOWER PLAN
9.2.2 MAN POWER BUDGET
9.2.3 ROLES AND RESPONSIBILITIES
10. TECHNICAL AND OPERATIONAL PLAN
10.1 RAW MATERIAL REQUIREMENTS
10.2 MACHINERY AND EQUIPMENT REQUIREMENTS
10.3 LAYOUT OF THE BUSINESS PREMISES
10.4 GROWTH MANAGEMENT AND QUALITY ASSURANCE
10.4.1 DISEASE CONTROL AND PREVENTION
10.5 EGG PRODUCTION PROCESS
11. MARKETING PLAN
11.1 PRODUCT
11.2 PROMOTION
11.3 PRICING
11.4 PACKAGING
11.5 PLACE
11.5.1 LOCATION OF THE PROJECT
12. KEY FINANCIAL MANAGEMENT CONTROLS
12.1 BOOKEEPING AND FINANCIAL ADMINISTRATION REQUIREMENTS
12.3 IMPORTANCE OF BOOKKEEPING AND FINANCIAL ADMINISTRATION
12.4 COMPUTERISED BOOKEEPING AND FINANCE SYSTEM
13. MONITORING AND EVALUATION PLAN
14. RISK ANALYSIS
15. PROJECTED FINANCIAL STATEMENTS
15.1 ASSUMPTIONS
15.2 APPLICATION OF FUNDS
15.3 BUDGET
15.4.1 COMPUTATION OF COST PER UNIT PRODUCED
15.3.2 AVERAGE CONTRIBUTION MARGIN CALCULATION
15.4 INCOME STATEMENT PROJECTIONS
15.5 CASH FLOW STATEMENT PROJECTIONS
15.6 BALANCE SHEET PROJECTIONS
15.7 RATIO ANALYSIS
15.8 BREAKEVEN ANALYSIS
15.9 SENSITIVITY ANALYSIS
EXECUTIVE SUMMARY

OVERVIEW

Poultry House Project CC is a community based project that was conceptualised by three passionate, committed and
enthusiastic social entrepreneurs. This exciting project is the brainchild of Thando, Tsegofatso and Pearl. Poultry
House Project CC was set up to promote the creation of jobs, women and youth empowerment, economic
development and poverty alleviation. It features key stakeholders such as the youth and women, members and
workers of the project, customers, suppliers and the wider community. The project will specialise in the production
and sale of eggs. The project will essentially purchase ready to lay pullets and raise them through their productive
cycle. The project members have already identified a suitable location for the project and have entered into
discussions in connection with leasing a farm. The project shall be based in the outskirts of Rustenburg (North West
Province), South Africa.

THE BUSINESS OPPORTUNITY

The members of the project have realised that there is great demand for eggs by hotels, bed and breakfast
providers, guest houses, holiday resorts and other related entities. These entities usually procure their eggs from as
far as Ventersdorp and are inconvenienced financially as well as time wise by transportation activities and their
associated costs and risks. There are currently few reliable egg producers and suppliers based in the outskirts of
Rustenburg.

Poultry House Project CC wishes to exploit the opportunities presented by engaging in the production and sale of
eggs. This shall be by means of purchasing ready to lay pullets, which shall be kept and nourished at the premises of
the project during the productive phase of their lifespan. The eggs produced shall be collected, sorted, packaged and
thereafter sold and distributed to the target market of the project - which primarily encompasses, small to medium
sized hospitality related entities.

THE MARKET

The identified key segments for the project include, individual and corporate consumer market segments. In terms of
similarities, both individual and corporate clients seek the health and taste benefits of eggs. They regard eggs as an
excellent source of protein, which is at times an alternative to red or white meat. As for the differences, the
quantities required and purchased by corporate clients supersedes that of individuals. The corporate market
segment is more lucrative as compared to the individual consumer market segment. This is attributed to the fact that
the segment has a greater growth rate, growth potential and is more profitable.

THE TARGET MARKET

The selection of a lucrative market is imperative to the success of Poultry House Project CC. Key factors were
considered prior to selecting a lucrative market for the project. These encompass profitability, growth, growth
potential, size of the market, risks associated with the market and the capacity of the business to serve the selected
market. The proposed target market for Poultry House Project CC shall be primarily composed of consumers within
the corporate arena. The business will target resorts; essentially the customers shall emanate from bed and breakfast
providers, guest houses, mine kitchens and hostels, tertiary institutions as well as small scale and emerging
community stores within the outskirts of Rustenburg. The project shall primarily target hospitality businesses near
Sun City as well as attraction centers such as Pilanesberg National Park. Additionally, the project shall strive to secure
contracts to supply eggs to prominent hotels on a regular basis.

THE COMPETITION

The market is composed of both direct and indirect competitors. Direct competitions will emanate from small scale
poultry farms in close proximity to the business. These include Phokeng Poultry Farm and other small scale
commercial farmers. The project will face indirect competitors from well established players such as Rainbow
Chickens, OBC Chickens, Chubby Chicks, Supreme Poultry, California Chickens, Big Chicken Company and other
premier commercial farmers.

THE COMPETITIVE STRATEGIES

In terms of competitive advantages, the project will focus on having a thorough understanding of the needs and
preferences of the customers. The business will strive to ensure that it has a better understanding of the customers
needs and preferences as compared to its direct and indirect competitors. Meeting the expectations of customers will
be a key priority for the business. Efficient and effective marketing will be important to drive the sales and profits of
Poultry House Project CC. Emphasis will be placed on establishing a strong brand for the project that provides an
excellent positioning for the project.

THE MANAGEMENT TEAM

The Close Corporation is made up of a strong management team of three committed and dedicated women. They
will share various roles and responsibilities in the identified business functions such as marketing, human resources,
operations, finance and many more. The three members will represent the ownership of the project but specific
management and operational functions will be given to each member. One of the three members will be given the
responsibility of the overall management of the project and will report to the other members who will act like a
board.

THE FINANCIAL PLAN

The project will require R2 394 500 in total in order to finance its capital asset requirements (R1 067 000) as well as
its working capital (R578 000 includes funds for feed). The main requisitions shall include: poultry houses for
layers, feeding systems, a delivery van, feed, vaccines, medicine, office furniture, equipment, fixtures and fittings and
much more.

PURPOSE OF THE BUSINESS PLAN

The purpose of the business plan is to serve as a motivation document to source the required funding for Poultry House
Project CC.

The business plan shall also be instrumental in the following ways:

To further understand the project

To understand the macroeconomic factors affecting the project
To understand the microeconomic factors affecting the project
To understand the industry that the project will operate in
To understand the dynamics of the market
To draw up a SWOT analysis and devise a vision and mission for the project
To develop strategic objectives and strategies for the project
To improve the performance of the project
To focus on a profitable activities and customers

1. PROJECT SUMMARY

1.1 PROJECT NAME

The name of the project is Poultry House Project CC.

1.2 PROJECT LOCATION

The project shall be situated in the outskirts of Rustenburg.

1.3 PROJECT SPONSOR

Poultry House Project CC is sponsored by the three project members. The project shall seek financial and non-
financial support from the local Municipality as well equity funding from local businesses and community
members. Debt financing shall also be sought from reputable commercial banks should the need arise.
1.4 PROJECT GOALS AND PURPOSE
The purpose of the project is to contribute towards improving the community, women and youth empowerment as
well as add value to the lives of the stakeholders of the project.

The project is expected to realise the following goals:

To empower women and youth

To create sustainable employment for women and youth
To contribute towards poverty alleviation
To ultimately create womens participatory self-sustaining development at local levels

1.5 PROJECT SCOPE

The scope of work at (business planning stage) includes an analysis of the industry, market, competition, external
and internal environment. The business plan shall also be coverage of the technical/operational aspects of the
project, the legal aspects, human resources and financial requirements of Poultry House Project CC.

1.6 METHODOLOGY AND APPROACH

The following methodology and approach will be used to help Poultry House Project CC achieve its purpose and
objectives:

Project The key milestones in the project initiation phase encompass the following:
Initiation
A consultation session with the key stakeholders of the project
The development of a project charter
The development of a business case

Project Plan The project plan will provide a detailed guideline aimed at helping Poultry House
Project CC realise its purpose and objectives.

Project This will primarily involve the implementation of the proposed solutions in the project
Execution plan.

Project This stage will evaluate the performance of the project in order to render the necessary
Evaluation actions and learn from the project for future reference.

Project This will mark the closure of the project and confirm that all deliverables have been
Closure provided and accepted.

1.7 PROJECT SCHEDULE

The main phases in the project include: the project initiation, project plan, project execution and project closure. The
progress of the project will be guided by the project timeline shown below
2.0 EXTERNAL ENVIRONMENT ANALYSIS

This section is coverage of the external environment analysis in order to identify opportunities and threats facing the
poultry farming concern.

2.1 POLITICAL CHANGES

AgriBEE presents an opportunity for the project in terms of ownership, management and procurement. AgriBEE
strives to create linkages, partnerships and networks for balanced, mutually benefiting results for all concerned.
It enhances competitiveness and sustainable development for agricultural business concerns
The promotion of SMME development in South Africa has been intensified. In light of the poultry industry, the
establishment of the Developing Poultry Farmers Organisation (DPFO) has been a great development as it is in
line with the thinking of the Government i.e. strategies relating to Broad-Based Black Economic Empowerment,
Job Creation and SMME development
The project is likely to benefit from agricultural based skills development and training as a result of the
establishment of AgriSETA
The performance of the Agricultural sector was affected by the fact that it was deregulated. The sector is now
moving towards being more competitive as the government is no longer strictly regulating the industry
The Spatial Development Framework stipulates and categorises areas for development. Key areas have been
earmarked for businesses, residential occupancy, farming and other uses. This is an opportunity for the project
as dedicated land for agriculture will be available for the agricultural project
Women and youth empowerment is one of the key agendas for the South African Government (currently). The
availability of support programmes such as The National Youth Development Programme will be an opportunity
in terms of financial and non-financial support for the project
The availability of funds for agricultural support from programmes such as Mafisa is an opportunity for the
project as it will potentially have access to funding for project expansion or improvement
The potential for increased support for the Poultry Industry is a reality as the Industry is considered to feed
the nation. This is certainly considered to be an opportunity for the project
Opportunities to access the export market as well as benefit from export support initiatives by organisations
such as Small Enterprise Development Agency (SEDA) are open to projects such as Poultry House Project CC.
This is likely to open up opportunities for the project in terms having a vivid presence in neighboring countries
to South Africa, other parts of Africa and the overseas market
The movement against anti-competitive behavior by the competition commission is an opportunity for the
project
The assistance by DTI to women involved in entrepreneurial projects will be an opportunity for the project
There is potential for financial and non-financial support by the Development of Southern Africa
Small business development programmes seek to help small businesses improve the quality of their products
as well as their well-being. This shall be an opportunity for Poultry House Project CC

2.2 ECONOMIC CHANGES

The global recession seems to be slowly phasing out as a result of the bail outs and other interventions. The
recession still remains live as various industries are still suffering as evident from unsatisfactory outputs, the
layoff of employees and declining profits. As an outlook, the recession is a threat to the project as people are
cautious or careful when buying products nowadays. Consumers are buying less of luxury products and moving
 towards necessities. As eggs are somewhat necessities, consumers continue to purchase these products in
satisfactory amounts
In terms of the local economy South Africa is intensifying communication about reports that it is out of the
recession. Various industries are peaking in output, profits and general well-being. Government has increased
spending on factors such as infrastructure which has resulted in more jobs being created for the people of
South Africa. Other initiatives such as reducing the interest rates have contributed towards cushioning the
adverse effects of the recession. This is promising for most businesses such as Poultry House Project CC can
access funds at a lower cost of borrowing
There is a potential for Eskom to increase electricity prices by at least 24.8%. This is a threat to the project as
its operations will be more costly and thus force the project to pass on the additional costs to consumers. This
is a threat to the project as it has potential to result in reduced sales and profits
The potential for a further increase in petrol prices will be a threat to the business as this will render the cost
of transporting the products of the project to be relatively high. An increase in petrol prices usually results in
an overall increase in the price of commodities and this burden is usually pushed towards consumers
Rising Inflation or the rising of costs is a threat to the project as this could potentially reduce the market for
the business. The tradeoff between inflation and employment is another factor to take into consideration
Interest rates are currently moderate this is encouraging as the cost of borrowing funds is not as high
Fluctuating exchange rates are likely to adversely affect the cost of imported items such as disease prevention
and control medications for the layers this will result in lower gross profit margins as a result of the increase
in the cost of goods sold
The use of maize for producing bio fuel has led to the reduced importance of using maize for feeding chicken
thus being a threat to the project

2.3 SOCIAL CHANGES

Unemployment still remains high and as an outlook this adversely affects the market for the project. Low
employment is linked to more money in the pockets of people and if this is not the case then projects such as
Poultry House Project CC will have a reduced active market
Poverty levels are currently still high in some areas of South Africa. Poverty levels mostly affect the youth and
women. The low skilled are hard hit by increased poverty. This unfortunately goes hand in hand with increased
crime levels. The high crime rate will be a threat for the project. Moreover, high poverty levels imply that there
are less people with money in their pockets, thus a reduced market for the project
The continued increase in the per capita consumption of eggs and chicken will be an opportunity for the project
The increasing population will result in more potential consumers for the project
The Government is committed towards improving the quality of education in South Africa. This is an opportunity
for the project as it is likely to benefit from a quality labor supply. It will also result in consumers that are aware
of the nutritional benefits of eating food such as eggs thus enhancing the quality and quantity of potential
consumers for the business
The increase in the budget for social grants will see more people having money in their pockets thus building
on the potential market for the poultry project
The growth of the middle income group and double income families have led to increased disposable income
allowing for more people access to products and services

2.4 TECHNOLOGICAL CHANGES

The new developments in technology for poultry farming present lucrative opportunities for the business to
enhance productivity and expand its horizons. The current technologies in the poultry industry mostly concern
specialized poultry equipment which includes the latest designs from abroad and a small percentage of some
locally developed designs. The project is open to benefit from advanced technology in key areas such as
production/ operations, distribution, marketing and back office support.
Operations can also be simplified and made efficient as a result of advanced technologies on the market; for
example, activities such as feeding of the layers, ventilation, lighting and room temperature control can be
aided by the use of automated technologies
With regard to distribution, trucks equipped with advanced cooling systems are within reach of the project
The business can also render significant improvements to its marketing efforts by making use of technology.
This can be by means of having a static or dynamic ecommerce website for the business that could provide
marketing literature to clients and also possibly facilitate enquiries and orders for the project. Branding material
such as business cards, business logos, business letterheads, presentations and brochures can also be made
using computer technology

In terms of back office support, technology in the form of computers and software is available on the market to facilitate
and simplify back office activities such as record keeping, accounting, logistics management and much more.
Additionally, technology will be an opportunity for the business in the sense that it can be used for market intelligence
purposes

2.5 ENVIRONMENTAL CHANGES

Environmental Impact Assessment (EIA) It will be imperative for an Environmental Impact Assessment to be
conducted. It will assess as to the positive or negative impact that the proposed project shall have on the
environment. Where the effects are not very detrimental, the project shall be given the go ahead to commence
operations
The use of chemicals to prevent and control diseases associated with poultry could impose a negative impact
on the environment. The business will have to take all the necessary precaution to ensure that the environment
is protected
The pollution of underground water is a key concern. The project will need to take underground water into
consideration by ensuring that all waste resulting from the poultry houses is well managed

2.6 LEGISLATIVE CHANGES

The project may face a compliance threat in terms of observing the Occupational Health and Safety Act
Full compliance with other Acts such as those relating to Basic Conditions of Employment Act, Employment
Equity, labor relations and many more could be seen as a threat to the business

Meeting the standard specifications of SABS can be perceived as a threat should the project have difficulties attaining
high standards

3.0 INDUSTRY ANALYSIS

3.1 INDUSTRY OVERVIEW

The project will form part of the Poultry Industry and the greater Agricultural Industry of South Africa. The Poultry
industry is threefold as it is divided into the following sub-industries:

Egg Production Industry

The Broiler Industry
The Day Old Chick Supply Industry

The specific industry that the project will make direct and valuable contribution to will be the Egg Production
Industry. The Southern Africa Poultry Association (SAPA) represents farmers making contribution to the Poultry
Industry at large and is responsible for promoting, coordinating and contributing to the welfare of the Poultry
Industry in South Africa.

The Poultry Industry is highly regarded in South Africa as it is an industry that makes significant contribution towards
feeding the nation. The Poultry Industry provides 61.4% of animal protein consumed in South Africa. The industry
has gone through some changes in the past as a result of the Agricultural Industry being deregulated. This saw a
reduction in production, lower margins in the early supply chain and a greater share of returns in the retail sector for
most agricultural products.

Recent studies have shown that the consumption of eggs is increasing steadily. According to the 2008 SAPA Poultry
Industry profile, the Poultry Industry is estimated to supply well over 368 000 tonnes of eggs and egg products per
annum. The increase in consumption is anticipated to grow in future. Moreover, of the total egg production output,
65-70% is consumed in the household sector, while 30-40% of consumption is attributed to food service, industrial
and commercial uses.

Key issues influencing the productivity of the industry include the following:

The maize price which is usually influenced by exchange rates, CBOT, local crop size, and SAFEX speculation
Poultry related diseases such as Newcastle Disease and Avian Influenza
Urbanisation
Redistribution of land
Imports posing great competition to local players
Raw material prices
Applicable product standards and regulations
 Food safety certification

Trade relations in Southern Africa

3.2 INDUSTRY SIZE

According to the SAPA Industry Profile for 2008, the gross turnover of the Poultry Industry was estimated at R6.03
billion per annum. This refers to the amount that is realised at producer level by the Egg Production Industry. The
Egg Industry contributes 22% to the total gross turnover realised by the Poultry Industry. The Poultry Industry
generates a total of R24 664 billion. This turnover is made up of R18 624 billion generated by broilers, R6 039 billion
for eggs and R3 095 billion for the chick industry. The percentage proportions are shown in the chart below:

3.3 GROWTH RATE

The Egg Industry is growing at an estimated growth rate of 5% per annum. This is on the basis of the 2008 Annual
Report from SAPA.

3.4 GROWTH POTENTIAL

With South Africas growing potential and increased growth in double income families, there is potential for the Egg
Industry to grow in the medium to long term. Essentially, the increasing demand for egg products is likely to drive
growth in the industry. The increasing growth potential is substantiated by the increasing per capita consumption in
eggs. For example, the per capita consumption for 2008 was 137 eggs per person per annum (an average of 11 eggs
per person per month) - this was an increase of 0.25% compared to 2007. Growth was anticipated for the year 2009
and 2010. South Africa has a high per capita consumption of eggs per annum as compared to other countries in
Southern Africa.

3.5 PLAYERS IN THE INDUSTRY

The main players in the industry include the following:

Commercial farmers
Emerging and small scale farmers
Transporters
Drugs and feed suppliers
Distributers and agents
Wholesalers and retailers
Informal traders

3.6 KEY SUCCESS FACTORS

The key success factors in the Poultry Industry encompass the following:

Focusing on a niche markets rather than targeting the mass market

 Employment of technology in raw material processing, production, marketing, distribution and back office
support.
Responsiveness to disease outbreaks: one disease outbreak can eliminate all the birds used in egg production.
It is therefore important to watch out for all disease outbreaks and exercise the necessary prevention and
control measures
Convenience: this in terms of being in close proximity to the customers. Customers usually purchase from
suppliers in close proximity to their business in order to cut down on transportation costs
Reliability: this key success factor pertains to delivering the right quality and quantity of eggs to customers at
all order or purchase occasions
Affordability: as the industry features many players, customers usually opt for the lowest price. Additionally,
considering the fact that eggs are generic products, it is important that the price is always right

Quality and quantity: the nature of the business is such that it is a high volume, low profit margin model. About 60%
of the costs are attributed to the feed requirements of the layers. It therefore important to sell in large quantities in
order to make a practical return. Quality in terms of taste and health benefits is another key success factor as most
consumers are very particular about these.

3.7 SUPPLY CHAIN MAP

The supply chain map of the Egg Production Industry is as illustrated below:

Farmers This primarily includes established commercial farmers, emerging small to medium
sized poultry farmers. In terms of forming part of these players, it is relatively difficult
as barriers are moderately high. These barriers encompass major capital requirements
for production, investment in flocks and feed. The fluctuating selling prices are also a
key factor to consider.

Packing Collecting, grading, and packing are done by the entities that own and manage brands.
While some farmers brand their own products, others seek the expertise of dedicated
brand strategists and other players in the value chain that specialize in branding.
Players in the industry such as Starpak Levy & Smith offer specialized grading, sorting
and packing solutions. While, there are relatively few players in this arena, it presents
 barriers to entry in terms of the technologies and knowhow required to professionally
grade, sort and pack eggs.

Transporters These move the poultry products from the farmers to other players in the value chain
such as wholesalers and retailers. Some farmers are well equipped with transportation
vehicles while others hire trucks to get their products to egg processors, wholesalers,
retailers and ultimately the final consumers.

Egg Marketing is essential to drive the products towards the wholesaler, retailers and end
Marketer consumers. The egg marketers are primarily distributors and agents as well as brand
management entities.

Market This involves all the channels that the product goes through to reach the consumer as
logistics well as the marketing involved. The products can be transported directly from the
producer or farmer to the final consumer. Alternatively, they can be sold to wholesalers
who then sale to retailers; the retailers thereafter sale to customers. Distributors and
agents also play a vital role in the market logistics of egg products.

End This is the domestic consumer or final consumer of the egg products.
consumer

3.8 SOUTH AFRICAN POULTRY INDUSTRY IMPACT ON SADC COUNTRIES

SADC Country Product Qty % share in Consumption Population Per Capita

(ton) SADC (ton) Eggs

South Africa 385 000.00 68.7 385 195.00 47 800 000 146.5

Zambia 46 900.00 8.4 46926.00 11 502 010 74.2

United Republic of 35 100.00 6.3 35 093.00 37 445 392 17

Tanzania

Zimbabwe 22 000.00 3.9 21 275.00 12 236 805 31.6

Malawi 19 500.00 3.5 19 516.00 13 013 926 27.3

Madagascar 14 900.00 2.7 14 921.00 18 595 14.6

469

Mozambique 14 000.00 2.5 14 147.00 19 686 505 13.1

Democratic Republic of 6 000.00 1.1 7 804.00 62 660 551 2.3

Congo

Mauritius 5 250.00 0.9 5 240.00 1 240 827 76.8

Angola 4 300.00 0.8 18 992.00 12 127 071 28.5

Botswana 3 150.00 0.6 3 180.00 1 639 833 35.3

Namibia 1 900.00 0.3 1 900.00 2 044 147 16.9

Lesotho 1 600.00 0.3 1 600.00 2 022 331 14.4

Swaziland 1 050.00 0.2 2 490.74 1 136 334 39.9

Hen eggs in shell SADC comparison

The 2008 SAPA Poultry Industry Profile showed that South Africa had the largest percentage share (68.7%) in
SADC. It had the highest production of 385 000 tons and per capita consumption of 146.5. South Africa is followed
by Zambia with a percentage share of 8.4% and Tanzania with a percentage share of 6.3% and production output of
35 100.

3.9 EGG PRODUCTION IN IEC COUNTRIES

Country Number of layers Shell egg production (X 1 000 Egg consumption per capita
(million) tonnes) (total)

Argentina 27.6 484.2 186

Australia 13.8 170.8 155

Austria 4.6 91 227

Belgium - 232 200

Brazil 98.7 1,367.4 132

Canada 25.9 372.8 260

China - 29 340

Colombia 35.2 525.4 205

Czech 10.3 142 244

Republic

Denmark 3 67 270

Finland 3 56.1 138

France 46.5 908 251

Germany 36 752 206

Greece - 94.5 132

Hungry - 172.4 295

India 115.3 2,403.3 38

Iran 48 570 130

Ireland 1.9 34 171

Italy - 808 219

Japan 136.9 2,420 324

Mexico - 2,307 351

Netherlands 30.7 575 182

New Zealand 3 46 218

Slovakia 5.7 71 199

South Africa 21 342 146

Spain 44.3 770 196

Sweden 5.9 99 198

Switzerland 1.9 40 184

Thailand 35.6 623 150

United 28.6 540 173

Kingdom

United States 288.1 4,736.9 256

Egg Production in IEC countries Source IEC Annual Review 08

The table above shows data pertaining to egg production in IEC countries. The top egg producers are Argentina,
Australia, Austria, Belgium, Brazil, Canada and China. South Africa ranked number 25th in the IEC Annual Review 08
with a shell egg production of 342 000 tonnes and per capita consumption of 146. According to the report, high
increases were observed in Thailand, Mexico, Argentina and South Africa. Countries such as Thailand showed a
dramatic increase due to their recovery from the impact of the avian influenza outbreaks.

4.0 MARKET ANALYSIS

4.1 MARKET SEGMENTATION

This section divides the market into similar groups with common characteristics so as to identify a lucrative market
segment for the products of Poultry House Project CC.

Generally, the potential market segments for the poultry farming business are as listed below:

Formal market sector

Grading and packaging entities

Wholesalers
Retailers
Franchise store
Processing entities
Export

Informal market sector

Hawkers
Spazas
 Spot hen depots

The potential market open to Poultry House Project CC is analyzed as per the following categories:

Individual market segment

Corporate market segment

4.1.1 INDIVIDUAL CONSUMER MARKET SEGMENTATION

The individual consumer market segment primarily covers individual consumers as well as households. This segment
is further discussed within the context of demographics, psychographics and behavioural segmentation.

Demographic While the location of the project is in the outskirts of Rustenburg, the potential
segmentation clients of the business emanate from the larger Bojanala District and other parts of
the North West Province. This market segment features both male and female
consumers. Their age categories encompass kids, adolescents, teenagers, youth,
adults and mature people. The market features low income, medium and high
income earners from a diversity of educational backgrounds.

Psychographic In terms of psychographics, the market features consumers with an array of

segmentation lifestyles. The lifestyles include career oriented men and women, scholars,
entertainers, holiday makers, famers and many more. They quest healthy balanced
lifestyles and have a positive, ambitious and charismatic personality. They value
eating tasty foods that are well prepared - (and are rich in all the essential vitamins
and minerals).

Behavioral The purchase occasion of consumers is usually once or twice a month. While
segmentation individual consumers purchase and consume around 18 to 30 eggs per month,
families or households purchase and consume around 30 to 60 eggs per
month. The key benefits sought by individuals are mainly the taste, quality and
health benefits of eggs. The behavior of consumers is also linked to the versatility
or wide array of uses of eggs.

Eggs have a wide variety of uses. People use them in the preparation of products
such as chicken burgers, scotch eggs, salad, and egg soup among others. Apart
from home consumption, eggs can be used as leavening agents in baked foods,
and as an ingredient in the manufacture of hair shampoo and for the production
of egg powder that can later be incorporated into baby food.

4.1.2 CORPORATE SEGMENTATION

The corporate segment can be divided into sub-segments; namely: small businesses, medium businesses and large
businesses. The sub-segments are further discussed below:

Market Segment Characteristics

Small Small businesses generally employ between 1 to 10 employees and have a

businesses turnover less than 500 000 per annum. Additionally, small businesses form part
of South Africas Small, Medium and Micro Enterprises (SMME) sector. Small
businesses can be split into micro and small businesses. Micro businesses have
assets of less than R50 000 and an annual turnover of less than R50 000.
Moreover, micro businesses employ less than 5 people. Small businesses on the
other hand have combined assets between R50 000 and R500 000. They have a
turnover between R50 000 and R500 000. Small businesses employ between 5
and 10 people. They are mainly made up of sole proprietors, small partnership
businesses and formally registered close corporation business entities ranging
from small fast food stalls to guest houses.
Medium Medium enterprises also form part of South Africas Small, Medium and Micro
businesses Enterprises. Medium businesses employ about 20 to 100 employees and have a
turnover that is greater than 500 000 per annum but less than 5 million. Medium
businesses range from bed and breakfast accommodation providers, medium sized
restaurants, holiday resorts and many more.

Large businesses This segment features large well established hotels, large wholesalers, large scale
exporters as well as eggs processing plants amongst other entities. Most large
businesses provide employment to more than 100 employees and have an annual
turnover that is greater than 3 million. They mainly consist of public limited
companies, private companies and non-governmental organizations.

4.2 NEEDS AND PREFERENCES OF THE IDENTIFIED SEGMENTS

4.2.1 NEEDS AND PREFERENCES CONSUMER OR INDIVIDUAL SEGMENT

Market Segment Needs and Preferences

Demographic As the potential market for the project covers the general outskirts of Brandenburg
segmentation and the wider Bojanala District, hallmarks such as reliability, convenience and easy
access to suppliers of poultry products are key needs and preferences. Additionally,
this segment usually looks for affordable products, so value for money is well sought
after by this market segment group and particularly by the low to medium income
earners. Cost saving is of prime importance to the low and medium income earners.
The high income earners place high priority on quality poultry products. Ultimately
value is highly sought after by customers.

Psychographic For most individuals, preference is driven by diets, health and taste considerations
segmentation and in some cases religious views on eating meat products. Consumers with a thirst
for hospitality seek creative uses of eggs - for example, some people prefer their
egg yolk partly fried or fully done. Others prefer them in forms such as Milkshakes,
Protein Shakes (mostly for people who like going to the gym), Ice Cream and Baked
products these add quality to the lifestyle of consumers.

Behavioral The benefits sought by individual consumers are primary the health and taste
Segmentation benefits of eggs. Eggs are considered to be a tasty protein source by most
individuals and families. Some people prefer eggs to other protein sources such as
meat and chicken. Additionally, with regard to behavior, some consumers are
particular about whether the eggs are a result of free range layers or caged layers.
Other factors include considerations such as the feed used to grow the layers in
most cases eggs from all grain fed layers are preferred.

4.2.2 NEEDS AND PREFERENCES CORPORATE SEGMENT

Market Needs and Preferences

Segment

Small Small businesses usually purchase eggs in packs of 18 to 30. They seek products from
businesses businesses that take affordability into consideration. Most small businesses prefer to
purchase eggs from retailers such as Pick n Pay, Spar, Shoprite, Fruit and Veg and many
more. Some small businesses that require bulk purchases opt for wholesalers and
nearby farms. For small businesses, reliability, affordability, nutritional value,
convenience and effective delivery of egg/ poultry products are instrumental
preferences.

Medium The quantity purchased by medium businesses is more than that of small businesses.
businesses Medium businesses usually prefer to buy eggs in bulk packs of 30 to 60 eggs. Medium
businesses such as wholesalers and retailers require a bulk supply of the poultry
products. They also have a preference for well established brands on the market that
 the retailers and end consumers can identify with. Medium sized retailers buy an ample
amount of poultry products and prefer to sale in units at a cost plus price. They have a
preference for well-known brands. Other retailers such as Pick n Pay prefer to brand
their own products. Medium sized businesses focus on healthy products that are
delivered in a professional manner. They normally buy the products in bulk as they cater
for a considerable number of people.

Large Large businesses usually require and procure egg products in bulk as they serve a wider
businesses consumer base. They require a supplier of eggs that can deliver large quantities of eggs
at prices that reflect economies of scale. Additionally, they require suppliers that are
reliable, convenient and are capable of delivering the right quality and quantity of eggs
at the right time and place. Additionally, large businesses usually have a procurement
policy which stipulates standard specification of the products they procure. These
specifications - in the context of egg products might specify as to the grade of egg
products required, nutritional value of the products, whether all grain or eggs resulting
from free range chickens.

4.2.3 SEGMENT ATTRACTIVENESS

Market segment

Individual market segment Corporate market segment

Low Medium High Low Medium High

Size

Growth

Growth potential

Profitability

Risk

Competition

The attractiveness of the various market segments is based on the market size, growth potential of the segment,
profitability, the risk associated with the segment and the nature of competition in the market segment. The
corporate market segment supersedes the individual market segment in terms of size, growth potential and
profitability. Corporate consumers are more reliable customers (taking into consideration the fact that they usually
buy in bulk orders, makes the segment more attractive). There is a risk of delayed payment on part of some
corporate entities. Nevertheless, with effective payment collection systems, the risk can be mitigated.

4.2.4 PROPOSED TARGET MARKET

The project will target small and medium businesses as this segment shows a distinctive consumer need for
exploitation. The project will essentially focus on small and medium sized lodges, mine kitchens, bed and breakfasts
and guest houses near Sun City and other resorts in close reach to the project. This segment has potential for future
growth and has a few direct competitors of a similar nature to the project. They ability of Poultry House Project CC to
serve this consumer segment has also been taken into consideration.

4.3 COMPETITION ANALYSIS

4.3.1 DIRECT COMPETITION

Direct Direct competition will emanate from small and emerging players in the poultry
competition industry that are in close proximity to Poultry House Project CC and target a similar
market as the project.

4.3.2 INDIRECT COMPETITION

Rainbow Rainbow Chickens is a well-established brand that distributes its meat and egg
Chickens products throughout Rustenburg and other parts of South Africa. It will pose direct
competition to Poultry House Project CC as it serves a similar market. Rainbow
Chicken benefits from economies of scale and also enjoys greater profit as they are
active in key areas of the poultry farming value chain.

OBC This is an established wholesaler that has also developed a national profile. OBC
Chickens currently operates a franchise model that has 65 branches nationwide in its
network. In North West, OBC has 10 different branches spread in major cities of
the province. OBCs business model consists of buying broilers in bulk, warehouses
centrally and delivers to the stores quickly and efficiently ensures both quality and
pricing. With around 22 years of operation OBC has rapidly developed to become a
major supplier in the whole South African Market, and they are now introducing hot
food counters with a select range of prepared meals.

Chubby Chicks Started far back in 1955 and has a presence in the North West Province, Chubby
Chicks is often described as one of the success stories of the South African poultry
sector. They intend doubling their production to over a million birds per week. They
have invested around 200 million Rand in new capacity and are expecting to invest
a further 300 million Rand in the coming years to cope with the soaring demand of
their products. Chubby Chicks supplies its products to Woolworths Food, the South
African up market fashion and food retailer. The company operates two breeder
rearing farms, two breeder laying farms, two hatcheries, nine broiler farms, three
free range farms, a processing plant and a rendering plant. They are part of the
main brands that control the poultry sector, albeit with less significant market share
(4%) like Astral and Rainbow who combine control 55% of the market.

Commercial and There are a number of commercial and subsistence farmers that are well
subsistence established in Rustenburg and sale a range of meat and poultry products
(primarily eggs) at affordable prices. Their products are fresh and usually sell very
generously. Competition will emanate from Haagners Poultry Farm, Fouries
Poultry Farm and SerfonteinPluimvee Poultry Farm. Some consumers in the
outskirts of Rustenburg drive to places as far as Ventersdorp to access poultry
products.

Other indirect Indirect competition for the project is also posed by foreign entities that sell chicken
competitors and egg products in South Africa. There is a stream of imports into South Africa,
predominately from Brazil, which have great competitive advantages in terms of
economies of scale. Where local demand is restricted, imports play an even more
important role as they enjoy a favourable price differential. Indirect competition
also emanates from the considerable proportions of eggs being sold through
informal sectors by small players, small scale farmers and hawkers.

4.3.3 INTENSITY OF COMPETITION

4.3.3.1 THREAT FROM NEW ENTRANTS

The threat from new entrants in to the market is relatively low taking in to account the huge capital required in order
to establish a poultry farm. There is also a high level of knowledge, skills, competencies and expertise required to
manage the poultry farm. Knowledge on livestock farming and poultry disease prevention and control is also
important and a limiting factor for new entrants. The investment required also hinders people wishing to participate
in poultry farming.

4.3.3.2 THREAT FROM CUSTOMERS

There is a threat emanating from the dynamics in the needs and preferences of consumers. Customer demands and
expectations must be met and products attractively priced, otherwise the customers could opt for other providers.
The threat is demonstrated by the scenario that the customers can buy from anywhere as well as the fact that the
price of the egg product is somewhat dictated by the market.

4.3.3.3 THREAT FROM SUBSTITUTES

While there is potentially no immediate substitute for an egg, the number of alternative providers of eggs based in
greater Rustenburg as well as areas as far as Ventersdorp is moderately high that the threat from substitutes is a
reality.

4.3.3.4 THREAT FROM SUPPLIERS

This threat is relatively minimal as there are many suppliers of layers and the essential stock feed and other
requisitions required to maintain layers used for egg production. A key source of layer birds is Ventersdorp where key
suppliers are present. A threat may emanate from a scenario where suppliers decide to channel most of their maize
raw material used in the production of chicken feed towards the emerging biofuel manufacturing industry.

4.3.3.5 INTENSITY OF RIVALRY

The intensity of rivalry is centred on factors such as price, reliability, quality, and brand recognition. The intensity of
rivalry in the Industry is relatively high as evidenced by the high frequency of marketing campaigns, internet
advertising, and number of new players entering the market, new strategic alliances being formed and the
subsequent closure of certain poorly performing businesses in the market. Major players in the industry such as
Rainbow Chickens, Chubby Chicks appear to control strategic areas of the value chain.

5.0 INTERNAL ENVIRONMENT ANALYSIS

The internal environment analysis is coverage of the scanning of factors considered internal to the project and within
the control of the business. Internal environment scanning is important in order to deduce the strengths and
weaknesses of the project. The identified strengths shall be capitalised on and the weakness shall be mitigated.

5.1 SHARED VALUES AND PRINCIPLES

The project members have great passion and commitment for the project.

Shared values and principles regarding the team are as follows:

Customer Intimacy
Process Efficiency
Transparency
Accountability
Honesty and Integrity
Convenience
Consistency
Reliability
Hygiene and good health

5.2 UNDERSTANDING OF THE STRATEGIC PLANNING PROCESS

The members need an understanding of effective opportunity identification and exploitation by means of external
and internal environmental scanning, coming up with a strategic intent, formulating strategies, implementing,
monitoring and evaluating plans. It shall be important for the project members to have a good understanding of the
industry (global and regional perspective), the market, competition, government policies and the available
opportunities.

5.3 ORGANISATIONAL STRUCTURE

A formal organizational structure demonstrating clear lines of communicating and reporting needs to be drawn up.
This shall be accompanied by an account on the roles and responsibilities of each person in the team. At present, the
project has a chairperson, treasurer and supervisors. A recommended formal organizational structure and an account
on roles and responsibilities have been provided under the staffing or human resource plan of this business plan.

5.4 LEADERSHIP STYLE

The members have a strong participative and democratic style of leadership. This style of leadership is appropriate
for the project as all members will appreciate the fact that their voices with regard to the direction of the business
are heard and that their contributions towards important decision making are valued.

5.5 STAFF REQUIREMENTS

In terms of staff, the project is well staffed as all three members shall work full time in the project. The project has
great potential to create employment for more people subsequent to the attainment of optimum operation levels.

5.6 SKILLS AND COMPETENCIES

The project demands skills in livestock farming with particular reference to rearing of chickens for egg production. An
understanding of poultry disease control and prevention is also important. Furthermore, the project requires essential
skills, competencies and expertise in key areas such as financial management, project management, strategic
planning, marketing, costing and business management and administration. The members of the project currently
have experience and expertise in general business administration and management. It will be important for the
project to seek advanced training in poultry farming and poultry disease control and prevention.

5.7 SYSTEMS
Currently the members of the business have a general understanding of systems. It is important for the members to
gain further understanding of systems as well as know how to implement them. The following systems are deemed
important for the business:

Management Information Systems

Quality Control Systems
Performance Management Systems
Accounting System
Risk Management System

6.0 SWOT ANALYSIS

6.1 STRENGTHS

The shared values of the project members with particular reference to teamwork, commitment and
perseverance
The strong participative and democratic style of leadership demonstrated by the members of the project
The business management skills of the project members
The managing members of the project are energetic, knowledgeable, creative and enthusiastic

6.2 WEAKNESSES
 The lack of advanced financial management skills
The lack of a comprehensive understanding of the strategic planning framework
Lack of trained human resource in the field of poultry farming and livestock disease prevention and control
The lack of a comprehensive marketing strategy and plan
The lack of funding to procure equipment and other assets
The low owners contribution as compared to the amount requested from external funders

6.3 OPPORTUNITIES

The opportunities in terms of ownership and procurement presented by AgriBEE

The opportunities in terms of skills development by means of training presented by AgrSETA
The Utilisation of Information Technology to enhance the front Office and back office operations as well as key
areas such as processing, marketing and distribution
Technologies such as solar energy will be an opportunity for the project as there is potential for a 24.8%
increase in electricity prices by Eskom
Access to funding programmes such as Mafisa and the National Empowerment fund
The increasing per capita consumption of eggs
The increasing population of South Africa and double income families will be an opportunity for the business
The reduced interest rates will mean lower costs incurred as a result of borrowed money
Government support of the Poultry Industry as it is one of the industries that is considered to be feeding the
nation
Increased emphasis on women and youth as demonstrated by financial and non-financial support by agencies
such as The National Youth Development Agency.
Increased small business support as demonstrated by the increase in small business support forums, Small
Enterprise Development agency and many more
The opportunity to supply government institutions such as prisons, collages, departments and other government
units will be an opportunity for the business

6.4 THREATS

Compliance with various acts and laws such as the Livestock Improvement Act, Occupational Health and Safety
Act, Labour Relations Act and the Basic Conditions of Employment Act
The threat from well-established competitors such as Chubby Chicks, Rainbow Chicken and many more
The threat from rising electricity prices. Eskom shall increase electricity prices by at least 24.8%, this is a threat
to the project as its operations will be more costly and thus force the project to pass on the additional costs to
consumers. This is a threat to the project as it has potential to result in reduced sales and profits
Indirect competition from distant emerging commercial and subsistence farmers and other small players in the
industry
The intensity of rivalry amongst players
The threat from suppliers in the case of feed, there is a threat of rising feed costs
The threat from substitutes or alternative protein rich food
The threat from changes in customer preferences as well as the fact that eggs are generic products that
customers can buy from other food stores

7. STRATEGIC FOCUS

7.1 VISION
The vision of the project is to be a women and youth empowerment community project that is renowned for
promoting a healthy well balanced eating within the society

7.2 MISSION
To contribute towards promoting good health and vitality as well as empowering women and youth and ultimately
adding value to the lives of all the stakeholders of the project
7.3 VALUES AND PRINCIPLES
Values and principles shall guide the actions of the members of the project and form the very essence of the culture
of the project. They include,

Respect and value for stakeholders as well as establishing long term value laden relationships in order to realise
mutual growth based upon mutual trust
The fostering of a corporate culture that enhances individual creativity, innovation and teamwork
The provision of excellent working conditions in terms of health and safety for the employees and other business
stakeholders
Integrity, honesty and understanding that success depends upon unswerving adherence to the standards and
principles of the project
The creation of value for clients by valuing their opinions and ensuring quality poultry products
Productivity in terms of being results driven and materializing value added achievements
Being efficiency in operations and other areas of the business
Working together in harmony as a team and cultivating a team spirit oriented business culture
Customer centric: this is a core value for the project as it strives to understand the needs and preferences of
its customers and superseding their expectations

8. PROJECT STRATEGIES

8.1 LONG TERM STRATEGIES

Expansion and diversification through the formation of strategic relationships and strengthening relationships
with strategic alliances. This will be aimed at establishing at least two more poultry farms within the district.
Diversification will focus at moving into the broiler and day old chick industry
Enter new markets such as the export market

8.2 MEDIUM TERM STRATEGIES

Focus on competitiveness by striving to achieve the desired positioning in the market

Focus on customer intimacy and process efficiency
Focus on niche markets
Focus on quality
Grow the market share of the project by understanding the needs and expectations of the customers better
than the competitors

8.3 SHORT TERM STRATEGIES

Formalise the organisational structure

Standardization of processes and procedures
Training and development of staff

8.3.1 FINANCIAL STRATEGIES

Enhance the profitability of the business by setting a sales mix that results in the most profitable contribution
margin
Minimise operating expenses by monitoring against the budget on a weekly and monthly basis
Minimise the bad debts by having a strict debt issue and collection policy

8.3.2 MARKETING STRATEGIES

 Improve awareness of the project by advancing publicity, having presence on the internet by developing a
website and other marketing efforts
Improve the competitiveness of the project by implementing market intelligence initiatives such as improving
the competitive advantages of the business, studying the competition, conducting market surveys and being
more customer intimate
Improve the image of the business by branding the business and its products as well as provide excellent
customer service and delivering promptly

8.3.3 OPERATIONAL STRATEGIES

Improve the efficiency of operations by ensuring that tasks are completed timely and that process and
procedures are evaluated so as to eliminate redundancies in workflow
Improve operations by standardizing processes
Employ technology
Regular audits in processes
Improve health and safety for the customers and employees by conducting regular audits to ensure that all
health and safety related regulations and standards are being met

8.3.4 HUMAN RESOURCE STRATEGIES

Improve the skills, knowledge and competencies of the members and employees of the project and eliminate
the risks associated with the loss of key man in the project by providing on going skills development and
training.
Employ a performance management system
Align the values of the individuals to team values

HUMAN RESOURCE PLAN

9.1 ORGANISATIONAL STRUCTURE

The following graph depicts the proposed organizational structure of Poultry House Project CC. This organizational
structure is expected to change when the business starts expanding and diversifying its product base.

Organizational Structure for Poultry House Project CC

9.2 MAN POWER REQUIREMENTS

Position 2010 2011 2012 2013 2014 2015

General Manager 1 1 1 1 1 1

Finance and Administration 1 1 1 1 1 1

Disease Prevention and Control Officer 1 1 1 1 1 1

Marketing and Distribution Officer 1 1 1 1 1 1

Operations Officer 1 1 1 1 2 2

Human Resource (this role shall be carried out by the 1 1 1 1 1 1

General Manager)

Quality Control Officer 1 1 1 1 1 1

Nutrition and Feeding Officer 1 1 1 1 1 1

Housing and Equipment officer 1 1 1 1 2 2

Security Guard 1 1 1 1 1 1

General Assistant 1 1 1 1 1 1

Total 11 11 11 11 13 13

9.2.2 MAN POWER BUDGET

Position Total Cost to Company Number Total

(Monthly)

General Manager 10,000 1 10,000

Finance and Administration Officer 6,000 1 6,000

Disease Prevention and Control Officer 5,000 1 5,000

Marketing and Distribution Officer 5,000 1 5,000

Sales and Promotions Officer 4,000 1 4,000

General Assistant - Packaging and distribution 1,000 1 1,000

Operations officer 5,000 1 5,000

Housing and Equipment Officer 5,000 1 5,000

Quality Control Officer 5,000 1 5,000

Human Resources (this role will be carried out by the - - -

managing members)

General Assistant 1,000 1 1,000

Security Officer 900 1 900

Total 12 52,900

9.2.3 ROLES AND RESPONSIBILITIES

Position Responsibilities

Project Sponsor The project sponsors shall assist the project with the required funding and oversee
the responsible and accountable use of the funds by the project. They will also
act as a board to ensure that the project achieves the set objectives and ultimately
its vision.

Project Members The project members shall be responsible for strategic planning and strategic
decision making in the project.

General Manager The General Manager shall be responsible for the implementation of the strategy
as well as ensure the smooth running of the project.

Finance and The officer responsible for the finance and accounting portfolio will be responsible
Administration for the following:
Officer
Compiling input for the management information system of the business
by engaging in tasks such as the filling of paper work in the business as
well as drawing
Handling of supplier and customer invoices.
The preparation of monthly and annual financial statements
Maintenance of the general ledger
Reconciliations
Preparations of budgets and forecasts
Ensuring that gross profit margins are accurate

Disease The Disease Prevention and Control Officer will be responsible for being on the
Prevention and lookout for poultry disease outbreaks and taking preventative measures so as to
Control Officer ensure that the poultry houses are disease free.

Marketing and The Marketing and Distribution Officer shall ensure that the marketing mix - that
Distribution Officer is, the product, place, price, promotion and packaging meets the expectations
and needs of the target market. The Marketing and Distribution Officer will offer
solutions to the clients of the project in terms of how they can best create
awareness for their businesses, improve sales and ultimately profits. The
Marketing and Distribution Officer shall also be responsible for developing
relationships with appropriate organisations and associations within the industry
and implementing a customer relationship management system for Poultry House
Project CC and the clients it serves.

Sales and The Sales and Promotion Officer will be responsible for direct and indirect
Promotions Officer promotions of the product.
Operations Officer The Operations Officer will oversee the operations of the project. The officer will
essentially ensure the efficiency and effectiveness of all processes involved in
operations.

Housing and The Human Resource Officer will be responsible for the recruitment, selection,
Equipment Officer performance and appraisal requirements of the project. The responsibilities will
also encompass the learnership and development requirements of the project.

General Assistant The general assistant will be responsible for the following:
Responsible for feeding the layer chickens

Assisting with the collection of eggs and ensure that the system for the
eggs to roll safely from the nests into collection or distribution troughs
without breaking is in good order
The General Assistant will be responsible sorting and packing the eggs in
preparation for distribution. The assistant will also help with the distribution
and logistics needs of the project.
Other poultry related general tasks

Security Guard The project will recruit one Security Guard. The Security Guard will be responsible
for guarding and protecting the property of the business.

10. TECHNICAL AND OPERATIONAL PLAN

10.1 RAW MATERIAL AND REQUIREMENTS

10.2 MACHINERY AND EQUIPMENT

Item Details

Layer These shall be in the form of layer battery cages that are put under a roofed house.
houses These will accommodate 2 500 layers. The cages are made up of cells which
accommodate 2 layers each. The layer houses will be such that they protect the layers
from direct sunlight, excessive wind, rain, extreme heat or cold, wild birds and theft.

Feeding Feeding systems will be required to easily distribute feed and water to the birds. The
Systems feeding systems can be automatic or manual. An automatic feeding system is
preferable. A Silo will therefore be important to store the feed.

Ventilation Ventilation will be important to ensure that the air quality and temperature is
Systems appropriate for the layers.

Motor A motor vehicle shall be needed to purchase layers, feed and other requisitions for the
Vehicle project. Additionally, a motor vehicle is essential for distribution purposes and other
logistical needs of the project. A panel van or bakkie shall be appropriate for the
project.

Office Equipment in terms of office chairs, tables, desks and cabinets shall be necessary for
Equipment the administration building of the project.

Consideration shall also need to be given to the following areas:

10.2.1 Water Supply

A reliable fresh water supply will be important for the poultry business. A borehole or other reliable source of water
will be imperative for the business. The business should also consider an overhead water tank of about 10 000 litres
capacity.

10.2.2 Electricity Supply

The provision of 250 KVA supply of electricity will need to be made for the project. Where possible uninterrupted
supply of electricity will also need to be facilitated by means of generators.

10.3 LAYOUT OF THE BUSINESS PREMISES

Shown below is the suggested layout of the business premises for Poultry House Project CC. The sections within the
business premises will include:

Reception
Back office
Back office storeroom
Cooling / Storage area
Sorting, Grading and packing
Toilets
Shower
Layer houses
Footbath

10.4 GROWTH MANAGEMENT AND QUALITY ASSURANCE

The factors shown in the schematic above are essential for managing the growth of the layer birds. To improve the
quality of the birds and eggs produced as well as better manage the layers, the following aspects must be taken into
account.

The raw material requirements for the project include the following:

Environment Managing the environment surrounding the birds in terms of lighting, temperature,
ventilation (air quantity and quality) and other climate related factors will be important
to improve the quality of the eggs produced.

Nutrition It is important to provide feed containing enough nutrients in the correct proportions.
Water supply is also important as it plays a role in keeping the birds rehydrated.

Health The immune status of the birds should be monitored so as to prevent and control
diseases.

10.4.1 DISEASE CONTROL AND PREVENTION

The point of lay pullets or layers will be pre vaccinated by the supplier. It will however be important to be on the
lookout for any disease outbreaks as well as take the necessary measures to prevent diseases. Good hygiene,
management as well keeping wild birds away from the poultry houses will help prevent diseases. The entity should
consult the nearest veterinarian or extension officer for a vaccination programme as well as report any signs of
diseases noticed. The community project should look out for the following diseases:

Disease Description Symptom

 New castle Highly contagious disease caused by a virus. Difficulty in breathing, paralysis
disease Disease can stay alive in a chicken carcass for and death, diarrhea
month

Infectious Highly contagious disease caused by a virus. Breathing problems, gasping,

Bronchitis Disease can stay alive in a chicken carcass for sneezing, watery nasal discharge,
month squeaky lung sounds

Coryza Spread through dirty water or air Watery nasal discharge, selling of
the face and eyes

Gumboro Infectious bursal disease, usually affects White, watery diarrhea, dirty
disease chicks up to the age of six weeks. Transmitted cloacas and ruffled feathers
by wild birds, rodents and humans

Mycoplasmosis Infectious disease which can affect egg Sneezing, squeaky lungs, gasping
production for air and sometimes discharge
from the eyes

Bird flu Often spread by the migration of wild birds. Little signs of disease and death
Virus can also affect people if they come into occurs suddenly
contact with an infected bird.

HEALTHY LAYERS

The activities that will contribute towards the raising of healthy layers that are less vulnerable to diseases are as
provided in the schematic below:

10.5 EGG PRODUCTION PROCESS

The process shown above will be followed by the project. The layers shall produce the eggs and these will be
collected and thereafter sorted according to the grade (i.e. grade 1, 2 and under grade).
The eggs will then be packaged and then placed in the storeroom while pending marketing and distribution.

11. MARKETING PLAN

The marketing efforts will focus on identifying and understanding the ever changing needs and preferences of the
customers in order to satisfy them. The marketing mix will drive the customer value proposition of the project. The
following is an account on the product, promotion, place and packaging that will be applied to the selected market
segment.

11.1 PRODUCT

The main products of the project shall be the eggs produced by the layer birds. The project will strive to improve the
quality of the eggs produced and sold by providing the right nutrition and environment condition for the layers. Other
products to be sold by the project will include the manure resulting from chicken droppings. Manure is a desirable
fertilizer that is highly sought after by farmers and flower growers. Additionally, the project will sell layers (cull hens)
that become unproductive (around 70 -110 weeks). Cull hens are considered to be a delicacy for most consumers
and as such, the business will be in position to sell these at lucrative prices.

11.2 PROMOTION
Poultry House Project CC will use a combination of push and pull strategies to create awareness for the business and
appraise leads and sales. Communication will essentially be directed to small and medium sized entities such as
lodges, bed and breakfasts and lodges. The target consumers will ideally pull the product through the distribution
channel forcing the wholesalers and retailers to stock the products of the project. The marketing efforts of the
business will be designed such that they create attention, interest, desire and ultimately cause the target audience to
take action by purchasing the products of the business. The project will make use of the marketing and distribution
officer so as to ensure that the promotion efforts are well executed. The marketing officer will also assist the
business in establishing a brand for the business i.e. Poultry House Project CC and promote it so that the customers
are able to identify the project and product. Branding will also assist in terms of positioning or creating a picture in
the minds of the consumers about the project and the products it provides. It shall encompass the following:

A project The project will register a domain name and engage a web design consultant to
website develop a website for the project that provides information to potential clients. This
will not only give the project a local presence but also open up opportunities for an
international presence.

Project logo A business or project logo will be developed for the project. This will be a graphical
icon that will help customers easily identify the project.

Professional The professional letterhead will be developed for the project. It will be used to write
letterhead letters to suppliers, customers and other stakeholders. The letterhead will form part
of the branding for the project as it will essentially be used for communication
purposes

Flyers A4 and A5 sized flyers will be made to promote the products of the business.

Business cards These will be small wallet sized cards that will be made for each member of the
business. The cards will show the name of each member as well as their contact
details. The business cards will be given to potential clients in order to engage further
communication

Business The business will have a catchy and creative slogan that will form part of its branding
slogan and business culture.

Poultry House Project CC will establish a unique selling advantage as it will look into all aspects of adding value in terms
of customer intimacy and value based pricing. This will be communicated to the clients via promotion means.

Appropriate and effective forms of advertising will include word-of-mouth, hand-delivered flyer promotion to promote
any specials that the project might have. This can be extremely effective if coupled with client referrals as a base with
constant monitoring and follow-ups. Market intelligence; that is, being aware of the market and changes within the
market will be vitally important. For example new competitors, keeping customers aware of any new developments
or products will be an integral part of the promotion efforts of the project. Keeping the name current in the mind of
the consumers will also be of utmost importance. Clearly targeted and consistent advertising will increase sales, improve
the market share and earns the project greater profits while hopefully developing new entries into new markets. The
promotion initiatives of the project are categorized and summarized in the following table:

Promotion Details
Avenue

Publicity and Publicity and public relations will encompass the stimulation of demand by interacting
public relations with the community via articles in local releases as well as making the community
informed about the project and the value it adds to society. This will be done at public
gatherings, churches and other appropriate places

Advertising This will encompass non-personal presentation and promotion of the products of
Poultry House Project CC through media channels such as flyers and local radio
stations. The advertising will be in such a way that it educates the target audience
about the nutritional benefits of eating eggs.

Sales This will be coverage of impersonal and short term or occasional offering of incentives
promotion such as small discounts on bulk purchases of eggs or buy one get one free
campaigns

Personal selling The project will make use of dedicated sales and marketing personnel that will be
responsible for communicating the benefits or value of the products of the project to
potential customers.
11.3 PRICING
The business will make use of accounting and costing systems to determine the unit cost of the eggs. This way of
pricing is justified as the business needs to sell at a price higher than the cost per unit and essentially cover other
related costs and expenses. It will be important for the project to monitor the costs such as feed, vaccines, labour
and other direct cost as these can be 60 70% of the cost of goods sold. Poultry House Project CC will also monitor
the prices of its competitors so as to promote competitiveness.

The pricing of the egg products will also depend on the grade of the egg. Given below is a breakdown on the
suggested price per dozen of eggs in accordance to the grades. These are based on the average market prices for
2010.

Grade Weight Selling price per dozen

Grade one 51g - 59g R14.00

Grade two 41g - 50g R12.50

Under grade Below 41g R11.00

11.4 PACKAGING
The egg products of the project will be packaged in paper egg trays and neatly sealed with a protective plastic
covering. The plastic covering will bear the name of the project or brand name as well as a catchy phrase.
Information regarding the weight and nutritional value of the products will also be provided.

11.5 PLACE

11.5.1 LOCATION OF THE PROJECT

The project shall be located in the outskirts of Rustenburg, North West Province. The place has good access roads
and communication networks. It can be accessed using the R510 road from Rustenburg, North West Province. The
project will however need to invest in a motor vehicle to access greater markets around Bojanala District and further.
Nevertheless, with an excellent promotion mix, the target market will be attracted to come directly to buy from the
project.

12. KEY FINANCIAL MANAGEMENT CONTROLS

12.1 BOOKKEEPING AND FINANCIAL ADMINISTRATION

In terms of the bookkeeping and financial administration needs of Poultry House Project CC, the business needs to
keep and maintain bookkeeping and financial administration records as noted below:

Records of all sales made together with copies of invoices issued

A record of all the purchases and expenses of the business
Invoices for all the business purchases and expenses
Details of any amounts that are taken for personal use by the project members
Copies of the bank statement

It will also be important for the business to maintain a record keeping system of the following documents:
Document/ records Details

Business Registration The founding statement of the Close Corporation in terms of the CK1
Documents

Statutory Documents IT 14 Income Tax

IRP 3
Employees Tax Certificates, that is; IRP 5 and IT3
Tax Clearance Certificates
Financial statements - in terms of the income statement and
balance sheet

Financial Documents and Sales analysis reports

Records Expense analysis reports
Financial statements
Fixed Asset Register

Bookkeeping Records The financial records essentially include the following:

Sales day book

Purchases day book
Cash receipt book
Cheque payments book
Petty cash book
General Journal
Nominal Ledger
Accounts Payable Ledger
Accounts Receivable Ledger
Payroll System

Financial Statements Statement of Financial Performance (Income Statement)

Statement of Financial Position (Balance Sheet)
Cash flow Statement

Other Records Business minutes for meetings

Business letters to clients, suppliers and other stakeholders
Other documents

12.2 IMPORTANCE OF BOOKKEEPING AND FINANCIAL ADMINISTRATION

The importance of a bookkeeping and financial administration system cannot be overstated. The key importance of
bookkeeping and financial administration is to extract accurate data and information for the preparation of useful
financial statements such as the statement of financial position, statement of financial performance and cash flow
statement, to mention a few principle ones. The importance of bookkeeping and financial administration is as
discussed below:

Bookkeeping and financial administration facilitates the keeping of accurate and complete records. If the project
does not keep accurate and complete records, it could end up paying more tax than is actually due to the South
African Revenue Services because of a lack of evidence of tax deductible expenditure. Another factor to consider
is that in some cases the Accountant of the project charges according to how long it takes them to prepare the
financial statements. With proper and complete bookkeeping and financial administration, it shall be less
complex, hassle free and time saving to prepare financial statements.
Additionally, a key important reason is the fact that bookkeeping and financial administration ensures that the
managing members have control over the project and that they can assess the profitability and cash flow
situation of the business. Ultimately the managing members shall be in a position to make decisions on the
basis of the reports resulting from bookkeeping and financial administration.
13. MONITORING AND EVALUATION PLAN

Objectives Indicator Target

Financial objectives

To attain a return on investment higher Return on investment per annum > 15%
than the cost of capital invested in the
business

To improve the profitability in the project Contribution margin > 40%

Marketing objectives

To meet and exceed customer expectations Customer satisfaction survey 100% customer
satisfaction

Establish long term customer relations Amount of repeat and referral 100%
business

Improve competitiveness of the business Feedback from customers Bi-monthly

Operations objective

To improve efficiency within the workplace Dynamics in workflow Weekly

To effectively utilize existing resources Deliveries Monthly

within each functional area of the business Quality standards

Improve health and safety within the Quarterly audits Monthly

project

Human Resource objective

To improve the motivation of employees Performance management Quarterly

Staff certifications and number of
training workshops and
programmes

14. RISKS ANALYSIS

Discussed below are the key risks and issues likely to face Poultry House Project CC. An account on the possible
mitigation efforts is also given.

Financial Risk

In terms of the financial risk, this emanates from the fact that the owners contribution is less compared to the funds
required from potential investors. Hence, the gearing ratio is therefore not as desirable. To mitigate this risk, the
project members shall strive to reinvest at least 60% of the profits into the business so as to improve the gearing
ratio. The project will strive for a good return on investment. In the first year of operation, employee costs will be
minimised so as to ensure that this risk is minimised.
 Market Risk

There is a potential market risk in terms of competition from well-established poultry farms and suppliers such as
Rainbow Chickens, OBC Chickens, and Chubby Chicks. Poultry House Project CC will have to compete for market
share with these established businesses. To mitigate this, the business will focus on a specific market segment and
strive to understand the customers better than the competitors.

Human Resource Risk

The project will require skilled, knowledgeable and competent staff in significant areas such as business
management, financial management, costing, entrepreneurship and technical aspects relating to raising layers and
egg production management. It will be important for the owners, management and employees to be well trained.
Moreover, a loss of key personnel is likely to affect the business adversely. To mitigate this risk, the business will
promote and cultivate a culture of sharing knowledge and skills amongst the members and employees. The business
will approach agencies such as SEDA for business training sessions. The project will also be part of agriculture related
training facilitated by AgriSETA, the Department of Agriculture or The Southern Africa Poultry Association.

Economic Risk

Another risk facing Poultry House Project CC is an economic risk. On a global level, there is currently an economic
recession (declining at present), as such the unemployment rate has gone up meaning that few people have buying
power and the fact that consumers have tighter budgets as compared excellent financial years such as the year
2007. Furthermore, an economic risk may emanate from the high electricity charges should Eskom go ahead with the
24.8% hike currently subject to discussions. This may ultimately outlook high inflation that renders expenditure
items and other costs to be expensive. The depreciating rand is also a factor to consider as it also affects prices of
procurements such as vaccines, medicines and imported feed supplies. This risk is external and out of the control of
the business. There will be likelihood to implement energy saving measures such as the use of energy saving bulbs.
Poultry House Project CC will look into alternative energy sources such as solar power and wind mills. The business
will strive to not pass on the costs to consumers as it understands that affordability is one of the key success factors
in the poultry industry.

Event Risk or Risk of Disease Outbreaks

There is a risk of outbreak of diseases that could adversely affect the products of the project. When poultry is kept
intensively, the risk of disease is very high for the mere reason that the birds are too close to each other. If proper
vaccination programmes are not followed the business could suffer major financial losses. It is important that a
proper vaccination programme is followed. The vaccination will minimize the threat of diseases. Personnel will ensure
that the birds are monitored for diseases and that the chicken housing are kept clean and secure from other event
risks.

15. PROJECTED FINANCIAL STATEMENTS

15.1 ASSUMPTIONS

The following are the underlying assumptions for all the financial statement projections drawn up for Poultry House
Project CC.

Item Assumption

Capital expenditure R1,067,000

Working capital requirements R578,000

Working days per month 26 days

Debtors collection period 30 days

Creditors payment period 45 days

Revenue growth 10%

inflation rate 6%

Average contribution margin 45.8%

Stock turnover rate 7 days

Farm capacity 2,500 layers

Mortality rate 0.15% per week

Efficiency result per layer bird 280 eggs per annum are produced by each layer bird;
approximately 23 eggs are produced by each layer bird per month

Rate of lay 2 eggs every 3 days per layer bird

Total eggs laid per annum 54,825 dozens

Laying period Effective period of laying = 52 weeks

Birds will be hosted at 18 weeks of age and molted at 70 weeks of
age

Laying period feed per bird 40 - 50 Kg per layer bird

Feed consumption 120g - 150g per layer bird

Feed required to produce a 1.75 + - 0.19 kg feed

dozen eggs

Weight of feed per bag per Kg 50Kg

Average selling price of eggs R15.00

(per dozen)

Average selling price of eggs R38.00

per tray (30 eggs)

Sale of manure and litters Selling price = R25 per 25Kg bag
Frequency = twice per year

Sale of unproductive aged Age of sale = 70 - 110 weeks of age

layer birds (fowl) Average weight = 1.8 Kg
Average farm price = R20

15.2 APPLICATION OF FUNDS

Application Grant provider/ Total

sponsor

Poultry housing, structure for the layers 800,000 800,000

Equipment 180,000 180,000

Generator 20,000 20,000

Fencing 180,000 180,000

Motor Vehicle 150,000 150,000

Office equipment 25,000 25,000

Fixtures and fittings 15,000 15,000

Testing of standards by SABS 50,000 50,000

Environmental Impact Assessment 30,000 30,000

Borehole drilling, casing, pipe laying, stand and tank 165,000 165,000

Connection fees - water and electricity 6,500 6,500

Branding, labeling and packaging 45,000 45,000

Pullets - point of lay pullets 150,000 150,000

Feed 500,000 500,000

Working capital requirements (includes medication and 78,000 78,000

vaccines)

Total 2,394,500 2,394,500

15.3 BUDGET

The following budget is based on the assumption that birds are housed at 18 weeks of age and sold at 70 - 110
weeks of age (52 weeks of production)

Mortality estimated at 8% per annum

Item Quantity Unit Price Total

Receipts

Jumbo and extra large 23,606 Dozen 18 424,908

Large 27,376 Dozen 15 410,640

Medium 11,308 Dozen 12 135,696

Receipts from eggs 62,291 - - 971,244

Fowl sold: 2300 @ 1.8 Kg 4,140 Kg 20 82,800

Total Receipts 1,054,044

Variable costs

Pullets 2,500 Bird 60 150,000

Feed 2,500 50 Kg/ bag 200 500,000

Advertising 2,400

Utilities - electricity and water 6,000

Repairs and maintenance 1,025

Egg cartoning and packaging 46,488

Total variable costs 705,913

Return above variable costs 348,131

Fixed costs

Labor 86,400

Insurance 25,000

Egg cooler 15,000 10 yr 2,250

Building (related costs) 39,600 10 yr 5,940

Equipment (related costs) 24,312 10 yr 3,647

Total fixed costs 123,237

Total costs 829,150

Net returns 224,894

15.4.1 COMPUTATION OF COST PER UNIT PRODUCED

Variable Details

Total variable costs R705,913

Total fixed costs R123,237

Cost per dozen = R829,150/62,291

= Total cost/ number of dozens produced = R13.31 per dozen
Number of dozens produced = 62,291
Cost per unit = R13.31/12
= Cost per dozen/12 = R1.12

15.4.2 AVERAGE CONTRIBUTION MARGIN CALCULATION

Product Gross profit % Sales Mix% Contribution Mix

Eggs 46.5% 92.4% 42%

Manure 51% 3.1% 1.5%

Aged unproductive layers 24.5% 4.5% 1.1%

Average % 44.6%

15.4 INCOME STATEMENT PROJECTIONS

Sales Year 1 Year 2 Year 3 Year 4 Year 5

Sale of Eggs 949,100 1,044,010 1,148,411 1,263,252 1,389,577
Sale of Manure for Fertilizer 15,100 16,610 18,271 20,098 22,108
Sale of aged unproductive layers 20,000 22,000 24,200 26,620 29,282
Total Sales 984,200 1,082,620 1,190,882 1,309,970 1,440,967

Cost of Goods Sold

Material 504,778 555,256 610,782 671,860 739,045
Labour 47,455 52,201 57,421 63,163 69,479

Total Variable COGS 552,233 607,457 668,203 735,023 808,524

Total Cost of Goods Sold 552,233 607,457 668,203 735,023 808,524

Gross Profit 431,967 475,163 522,679 574,947 632,443

Operating Expenses
Sales & Marketing 6,000 3,780 3,968 4,167 4,376
Research & Development - - - - -
G & A (without Depreciation) 171,360 176,678 185,516 194,793 204,534
Depreciation 254,448 254,452 254,452 254,450 254,450

Total Operating Expenses 431,808 434,910 443,936 453,410 463,360

Income From Operations 159 40,253 78,743 121,537 169,083

Income before Taxes 159 40,253 78,743 121,537 169,083

Taxes on Income 45 11,271 22,048 34,030 47,343
 Net Income After Taxes 114 28,982 56,695 87,507 121,740

15.5 CASH FLOW STATEMENT PROJECTIONS

Sources of Cash: Year 1 Year 2 Year 3 Year 4 Year 5

Operations During the Year
Net Income After Taxes 114 28,982 56,695 87,507 121,740
Add items not decreasing
cash
Depreciation 254,448 254,452 254,452 254,450 254,450
Increase in Accounts 79,725 84,104 16,383 182,265 36,247
Payable

Deduct items not

increasing cash
Increase in Accounts 97,500 2,951 10,045 (2,827) 10,767
Receivable
Increase in Inventory 10,213 898 2,905 80 1,410
Cash from Operations 226,574 363,689 314,580 526,969 400,260

Financing & Other

Proceeds from Long Term 2,394,500 - - - -
Loans
Cash / Operations & 2,621,074 363,689 314,580 526,969 400,260
Financing

Applications of Cash
Payment of Dividends - - - - -
Purchases of Fixed Assets 2,394,500 - - - -
Increase/(Decrease) in 226,574 363,689 314,580 526,969 400,260
Cash

Change in Cash Balance

Ending Cash Balance 226,674 590,363 904,943 1,431,912 1,832,172
Beginning Cash Balance 100 226,674 590,363 904,943 1,431,912
Increase/(Decrease) in 226,574 363,689 314,580 526,969 400,260
Cash

15.6 BALANCE SHEET PROJECTIONS

Assets Year 1 Year 2 Year 3 Year 4 Year 5

Current Assets

Cash 226,674 590,363 904,943 1,431,912 1,832,172

Accounts Receivable 97,500 100,451 110,496 107,669 118,436
Inventory 10,213 11,111 14,016 14,096 15,506
Other Current Assets - - - - -
Total Current Assets 334,387 701,925 1,029,455 1,553,677 1,966,114
 Plant & Equipment
Machinery & Equipment 2,219,500 2,219,500 2,219,500 2,219,500 2,219,500
Office Equipment 25,000 25,000 25,000 25,000 25,000
Automobiles 150,000 150,000 150,000 150,000 150,000
Accumulated Depreciation (254,448) (508,900) (763,352) (1,017,802) (1,272,252)
Total Net Plant & Equipment 2,140,052 1,885,600 1,631,148 1,376,698 1,122,248

Total Assets 2,474,439 2,587,525 2,660,603 2,930,375 3,088,362

Liabilities & Owners' Equity

Current Liabilities
Short Term Debt - - - - -
Accounts Payable 79,725 163,829 180,212 362,477 398,724
Total Current Liabilities 79,725 163,829 180,212 362,477 398,724

Long Term Debt 2,394,500 2,394,500 2,394,500 2,394,500 2,394,500

Total Liabilities 2,474,225 2,558,329 2,574,712 2,756,977 2,793,224

Owner/Stockholder Equity
Common Stock 100 100 100 100 100
Retained Earnings 114 29,096 85,791 173,298 295,038
Total Owners' Equity 214 29,196 85,891 173,398 295,138

Total Liabilities & Equity 2,474,439 2,587,525 2,660,603 2,930,375 3,088,362

15.7 RATIO ANALYSIS

Ratios Year 1 Year 2 Year 3 Year 4 Year 5

Current Ratio 4.19 4.28 5.71 4.29 4.93
Quick Ratio (Acid Test) 4.07 4.22 5.63 4.25 4.89
Return on Total Assets 0.00% 1.12% 2.13% 2.99% 3.94%
Total Assets Turnover 0.40 0.42 0.45 0.45 0.47
Total Debt to Total Assets 1.00 0.99 0.97 0.94 0.90

Gross Profit Margin 43.89% 43.89% 43.89% 43.89% 43.89%

Operating Profit Margin 0.02% 3.72% 6.61% 9.28% 11.73%
Net Profit Margin 0.01% 2.68% 4.76% 6.68% 8.45%
Return on Sales 0.03% 6.10% 10.85% 15.22% 19.25%

Return on Owners' Equity 53.27% 99.27% 66.01% 50.47% 41.25%

Total Debt to Owners' Equity 11,561.80 87.63 29.98 15.90 9.46
 Operating Ratios
% Inc from Ops / Total 0.01% 1.56% 2.96% 4.15% 5.47%
Assets
% Profit BT / Total Assets 0.01% 1.56% 2.96% 4.15% 5.47%
Sales / Total Assets 0.40 0.42 0.45 0.45 0.47
Sales / Day (244 business 4,034 4,437 4,881 5,369 5,906
days)

Asset Management
(Efficiency)
Total Liabilities / Total Assets 1.00 0.99 0.97 0.94 0.90
Total Debt to Total Assets 0.97:1 0.93:1 0.90:1 0.82:1 0.78:1
Debt to Capitalization 23945.00:1 23945.00:1 23945.00:1 23945.00:1 23945.00:1
Liabilities / Net Worth 11,561.80 87.63 29.98 15.90 9.46
Return on Equity (Pretax) 74.30% 137.87% 91.68% 70.09% 57.29%
Return on Equity (After tax) 0.00% 1.12% 2.13% 2.99% 3.94%

Working Capital Cycle

Sales / Receivables 10.09 10.78 10.78 12.17 12.17
Days Sales Outstanding 36.16 33.87 33.87 30.00 30.00
Cost of Sales / Inventory 54.07 54.67 47.67 52.14 52.14
Days of Inventory 6.75 6.68 7.66 7.00 7.00
Cost of Sales / Payables 6.93 3.71 3.71 2.03 2.03

15.8 BREAKEVEN ANALYSIS

Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Sales 59,400 68,000 78,500 80,000 80,600 81,000 97,100

Fixed Costs

Sales & Marketing (w/o Commissions) 500 500 500 500 500 500 500

Research & Development - - - - - - -

G & A (without Depreciation) 14,280 14,280 14,280 14,280 14,280 14,280 14,280

Depreciation 21,204 21,204 21,204 21,204 21,204 21,204 21,204

Less Reclassified Fixed Costs - - - - - - -

Total Fixed Costs 35,984 35,984 35,984 35,984 35,984 35,984 35,984

Variable Costs

Material and Labour 34,399 39,440 45,530 46,400 46,748 46,980 47,838

Total Variable Costs 34,399 39,440 45,530 46,400 46,748 46,980 47,838

Income from Operations (10,983) (7,424) (3,014) (2,384) (2,132) (1,964) 13,278

Interest Income(Expense) - "Fixed" - - - - - - -

Income Taxes - "Variable" (3,108) (2,101) (853) (675) (603) (556) 3,758

Net Income After Taxes (7,875) (5,323) (2,161) (1,709) (1,529) (1,408) 9,520
Analysis

Income from Operations

Contribution Margin 42.09% 42.00% 42.00% 42.00% 42.00% 42.00% 50.73%
Break-Even Sales Volume 85,495 85,676 85,676 85,676 85,676 85,676 70,928

Sales Volume Above Break-Even (26,095) (17,676) (7,176) (5,676) (5,076) (4,676) 26,172

Net Income After Taxes

Contribution Margin 47.32% 45.09% 43.09% 42.84% 42.75% 42.69% 46.86%
Break-Even Sales Volume 76,041 79,805 83,515 83,989 84,177 84,298 76,785

Sales Volume Above Break-Even . (11,805) (5,015) (3,989) (3,577) (3,298) 20,315

15.9 SENSITIVITY ANALYSIS

Compare the best and worst case of each Income Statement line item to the planned values.
The Planned amounts are taken directly from the Income Statements.

Sales Pessimistic Planned Optimistic

90% 100% 110%
Sale of Eggs 854,190 949,100 1,044,010
Sale of Manure for Fertilizer 13,590 15,100 16,610
Sale of aged unproductive layers 18,000 20,000 22,000
- - -
Total Sales 885,780 984,200 1,082,620

Variable Costs Pessimistic Planned Optimistic

110% 100% 90%
Cost of Goods Sold 607,456 552,233 497,010
Fixed Costs Reclassified to Variable Costs - - -
Total Variable Costs 607,456 552,233 497,010

Gross Profit 278,324 431,967 585,610

% of Total Sales 31.42% 43.89% 54.09%

Operating Costs Pessimistic Planned Optimistic

110% 100% 90%
Sales & Marketing 6,600 6,000 5,400

Pessimistic Planned Optimistic

110% 100% 90%
G & A (without Depreciation) 188,496 171,360 154,224

Pessimistic Planned Optimistic

110% 100% 90%
Depreciation 279,893 254,448 229,003
Total Fixed Costs 474,989 431,808 388,627

Income from Operations (196,665) 159 196,983