AMBO UNIVERSITY

College of Social science

First Year Second Semester Students

BUSINESS PLANNING

Sebeta Milk Supply

Section 7

Group members

Name ID.no.

1. Keneni Jeylan………………………………………UGR/53186/13
2. Marame Bogala…………………………………….UGR/53279/13
3. Asrebeb Nigusie……………………………………UGR/52839/13
4. Hawi Dereje……...…………………………………UGR/53780/13
5. Sara Teshoma ……………………………...……….UGR/53821/13

Submitted to: Tolasa D.

Submission date: December/2021
Ambo
Ethiopia

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Executive Summary
Sebeta Milk Supply is a partnership form of business which is established in Sebeta, the
South West Shewa Zone by 2013 E.C. by six graduate class economic students of Ambo
University. The venture plans to supply milk to Sebeta Milk Processing Company and other
individual local customers. In the long run it also plans to send its products to the market of
Addis Ababa city.

The business has short-term and long-term objectives. In the short run penetrating the market,
creating linkages and gaining loyal customers will be given greater concern. For the long run
exploiting the market to gain profit, diversifying other dairy products and diversifying the
species of cows to have different quality products will be paid greater attention. The venture
requires a startup capital of Birr 490,000 of which 190,000 is financed by the venture
partners. The remaining Birr 300,000 is gained from loans from Oromia Loan and Credit
Association and gifts from friends & families. The venture requires adequate land area which
is given by the local administration but we are expected to pay Birr 1000 annually as lease.
On the land building will be constructed for the normal operation of the company. For the
day to day activity Birr 271,400 is required as operating expenses.

The venture consists of business school graduates who have good knowledge of marketing,
economic analysis and allocation skills. We choose partnership form of a business because as
graduate students we have an intention to become good businessmen in the future by sharing
our different skills and qualities. The unique characteristic of our venture is that all partners
come from variety ethnic and religious group, which is an important opportunity to know the
unique characteristics of our target customers. It is led by the general manager at the top that
is accountable for the venture partners. Under the general manager all member of the venture
are assigned as to manager of different staff of the business. Other employees are below the
venture members and they perform the normal operational activities of the venture. These
employees include milker, guard, sales man, casher and feeder.

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Table of Content

Executive Summary...................................................................................................................ii
INTRODUCTION......................................................................................................................1
1. Description of the Venture.....................................................................................................1
1.1. Mission of the Venture....................................................................................................1
1.2. Objective of the Venture.................................................................................................1
1.2.1. Short-Term Objective...............................................................................................1
1.2.2. Long Term Objective................................................................................................1
1.3. Product and Location.......................................................................................................1
1.3.1. Product......................................................................................................................1
1.3.2. Location....................................................................................................................2
1.4. Back ground of the Partners............................................................................................2
2. MARKET ANALYSIS..........................................................................................................2
2.1. Overall Market.................................................................................................................2
2.2. Specific Market...............................................................................................................2
2.3. Competitors Analysis......................................................................................................2
3. PRODUCTION......................................................................................................................3
3.1. Production Process..........................................................................................................3
3.2. Resource Requirement.....................................................................................................3
3.3. Quality Assurance...........................................................................................................3
4. Organization of the Plan.........................................................................................................4
4.1. Organizational Structure..................................................................................................4
4.2. Forms of Ownership........................................................................................................4
4.3. Manager’s Profile............................................................................................................5
5. MARKETING PLAN............................................................................................................5
5.1. Pricing Strategy...............................................................................................................5
5.3. Sales Forecast..................................................................................................................5
6. FINANCIAL PLAN...............................................................................................................6
6.1. Financial Statements........................................................................................................6
6.2. Financial Resources.........................................................................................................8
7.3. Financial Strategy............................................................................................................8

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7.4. Assessment of Risk and Contingency.............................................................................9
7.4.1. Risk...........................................................................................................................9
7.4.2. Contingency Plan......................................................................................................9

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 INTRODUCTION

1. Description of the Venture

1.1. Mission of the Venture
Mission of Sebeta Milk Supply is to be the competitive milk supplier to milk processing
companies and individual milk consumers in Sebeta town and Addis Ababa city.
1.2. Objective of the Venture
1.2.1. Short-Term Objective (up to one year):
 To penetrate the market with low profit margin;
 To gain loyal customers for the products of the venture ;
 To create market linkage with food (for cows) ;

1.2.2. Long Term Objective

 To gain profit by exploiting the market ;
 To diversify other dairy products like yoghurt, cheese, butter;
 To diversify the species of cows to have different quality products;
 To include other venture partners and exploit other financial sources to expand the
business.
 To compete both by product quality and by price;
 To supply milk to milk processing companies in Addis Ababa;
 To increase the number of cows and expand the overall structure of the business.

1.3. Product and Location

1.3.1. Product
Sebeta Milk Supply will produce milk from both domestic and special variety cows. Since
Sebeta town is cold the milk will be freshly supplied to the customers of the business.

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1.3.2. Location
This business is located in Oromia Region, South West Shewa Zone, Sebeta town. The town
is 25 kilometers west of the capital, Addis Ababa. This town is chosen as the residence of the
business because of the following reasons.

Food for the cows (grass and factory products) are available;
There is high unfulfilled demand for milk and dairy products in the town and
surrounding;
Sebeta is not far from Addis Ababa where there is great potential demand of the
product;
The place is relatively cold so that the milk is not to be sour quickly.

1.4. Back ground of the Partners

The partners are economics graduate students in Ambo University. As the social students, we
are interested in business leadership. These partners are of different family, ethnic and
religious backgrounds. There are also some partners who have experience in running the
family business.

2. MARKET ANALYSIS
2.1. Overall Market
Milk and dairy products are highly demanded. Even though rural part of Ethiopia is self-
sufficient in production and consumption, these products are highly demanded by urban
population of Ethiopia. Especially Addis Ababa is the promising market for this product.

2.2. Specific Market

Specifically the opening of Sebeta Milk processing company two years ago creates great
opportunity for mixed farmers who have one or two cows. But this milk processing company
needs more than what is being supplied now. In other way there are many individuals who
want to buy raw milk for their household consumption regularly. Therefore the market for
milk production in the surrounding of the residence of the business is highly promising.

2.3. Competitors Analysis

Unless the market is monopolized there is completion with different degrees in any market.
In this case, since the market can swallow the supplies from different individual suppliers,
completion is not the current challenge of the business. Moreover, the individual suppliers

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cannot compete even because they are predominantly farmers in which we can also compete
in quality since we are going to specialize in the area.

However, following the businesses profitability condition we expect stiff resistance from new
coming businesses in the area. But this would not also be a threat because we will be
predominant huge competitors of the milk and dairy market then.

3. PRODUCTION
3.1. Production Process
The milk production in this phase is not complicated. Even the highly skilled labor is not also
needed. The cows are milked twice a day commonly at the morning and at the night. Then the
morning milked product will be sent to customers at noon while the night milk at every
morning. Food for the cows will be bought weekly and grass will be prepared every semi-
annually. The cows will be feeding three times a day. Independent person who cleans the
house of the cows will be hired. Cleanness and dryness will be protected very carefully.

3.2. Resource Requirement

As any business Sebeta Milk Supply needs physical, financial, human, and technological
resources. Obviously land is needed. Related to government‘s policy to initiate small and
micro businesses land will be facilitated by the local government. We shall build different
houses for living of these cows and residence of the guards. Financially Birr 490,000 is
required as initial capital. Eleven individuals with different requirements will be hired.
Technology, for this business, is very important. First of all the scientific breading is
required. Modern containers and measurement of the milk are vital for the business. Medical
treatment will be given periodically to protect cows and employees healthy.

3.3. Quality Assurance

As has been explained in competitors’ status section quality is not only given unique concern
but also taken as one basic competition mechanism. In our business, quality matters more. It
starts from the species diversities of the cows. They will be of special quality so that the yield
will be diversified for different customers. Then the milking & marketing environment and
all other workers are expected to be clean. We want to be put everywhere and whenever in
the mind of our consumers which comes basically through quality assurance.

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 4. Organization of the Plan
4.1. Organizational Structure
Hierarchy of the Business

Venture Holders

General Manager: Keneni Jeylan

Marketing Financial Sales Customer

Manager: Human
Manager: Manager: Service
Asrebeb Resource
Marame Bogala Sara Manager: Sena
Nigusie Manager:
Hawi Dereje Teshoma kuma

4.2. Forms of Ownership

Sebeta milk supply is a partnership form of a business. The business is owned by six partners.
The involvement in decision making is based on the share that the partners have on the
venture. Dividends will be made at the end of the fiscal year of the country in order to be
suitable for tax purpose. The partners agree the priority to be business expansion than merely
short term profits.

No Venture Partners Share

1. Keneni Jeylan 25%
2. Marame Bogala 15%
3. Asrebeb Nigusie 15%
4. Hawi Dereje 15%
5. Sara Teshoma 15%
6. Sena Kuma 15%

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4.3. Manager’s Profile
As earlier explained in the organization of the management section the six partners are the
managers whose management positions are indicated. The general manager Keneni Jeylan
has leadership experiences in different clubs including Ambo University Economics Students
Research and Study Club as planning cluster chief. She had also business experience when
she was working with her brother furniture company in Bale Robe Town.

Other managers, below the general manager, also have different certificates from different
stages of their academic life, which indicates their hardworking position. With the general
manager, it is expected that they lead the business to success.

5. MARKETING PLAN

5.1. Pricing Strategy

The venture follows competitive pricing that basically does not fluctuate in the short run.
Since the products are almost identical, price is primarily set by the market. When we project
the prices for the consecutive years, 11% average increase in overall rice (inflation) is
assumed. Competition by price is not taken as the best strategy in this market rather quality
will be paid more attention.

5.2. Promotion
In relation to advertisement and promotion the business uses basically two methods. The first
method is using business cards and flying papers. The second strategy is building and
maintaining the reputation of the business through word of mouth. The market does not need
intensive mass media advertisement as such.
5.3. Sales Forecast
Year No of Cows Average Yield Estimated Estimated Unit
per Cow Milking Days Sales of Milk
(in liters) per Year (In Liters)
2013 8 20 350 56,000
2014 11 20 355 78,100
2015 15 20 360 108,000
2016 20 20 360 144,000
Total Estimated Units Sale 386,100

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 Year Unit Price (in Birr) Unit Sales Sales (In Birr)
2013 9.75 56,000 546,000
2014 10.80 78,100 843,480
2015 11.90 108,000 1,285,200
2016 13.20 144,000 1,900,800
Total Sales Revenue 386,100 16,142,280
Note: Price is increased annually by 11%

Year Cost of Sales (In Birr)

2013 327,600
2014 506,088
2015 771,120
2016 1,140,480
Total cost of Goods Sold 2,685,288

6. FINANCIAL PLAN
6.1. Financial Statements
Sebeta Milk Supply

Projected Income Statement

For the First Six Four Years

Description 2013 2014 2015 2016

Revenue 546,000 843,480 1,285,480 1,900,800
Operating Expenses
Land tax expense 1000 1000 1000 1000
Wage and salaries expense
Permanent workers 125,400 178,200 178,700 241,100
Contract workers 8,000 12,000 12,000 15,000
Total 133,400 190,200 190,700 256,100

Employees benefit - - 12,000 14,000

Feeding expense 70,000 100,000 150,000 170,000

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Transportations expenses 10,000 12,000 15,000 18,000
of grass
Advertisement expense 10,000 7,000 5,000 3,000
Utility expense 30,000 37,000 40,000 45,000
Miscellanies expense 10,000 11,500 14,000 16,000
Medical cost 7,000 9,500 10,000 12,000
Total operating expense 271,400 267,200 302,700 381,100
Gross profit 274,600 576,280 982,780 1,519,700

Less: Depreciation 10,000 15,000 17,000 19,500

Profit before income tax 264,600 561,280 965,780 1,500,200
Less: Income Tax (35%) 92,610 196,448 338,023 525,070
Net profit 171,990 364,832 627,757 975,130

Sebeta Milk Supply

Projected balance Sheet

At the End of Each Year (for four years)

Description Years
2013 2014 2015 2016
Assets
Current asset
Cash 209,000 231,000 245,000 285,000
Inventory
Total current asset 209,000 231,000 245,000 285,000
Fixed asset
Cows 240,000 341,000 472,500 640,000
Building 150,000 150,000 150,000 150,000
Less: Accumulated (3,250) (6,500) (9750) (13,000)
depreciation of building
Total Fixed Asset 386,750 484,500 612750 777,000
Total Asset 595,750 715,500 857,750 1,062,000
Liability

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 Current Liability 200,000 140,000 100,000 75,000
Long-term liability 100,000 100,000 95,000 72,000
Total Liability 300,000 240,000 195,000 147,000
Owner Capital
Capital 190,000 265,500 355,000 550,000
Retained earning 105,750 210,000 307,750 365,000
Total Liability and 595,750 715,500 857,750 1,062,000
owner’s capital

Note: Straight line method is used to calculate accumulated depreciation.

Salvage value= Birr 20,000

Expected service life=40 years

6.2. Financial Resources

The start-up cost of the venture is Birr 490,000. For activities of the business land is freely
given by the local administration. This is an opportunity is given to the new entrepreneurs
especially for those who are graduated from universities. But we are expected to pay
Birr1000 lease per year. In the first year of the business eight cows Birr 30,000 each will be
bought i.e. it totally costs 240,000. Building for living of the cows and other administrative
proposes costs Birr 150,000. Feeding utile for cows and special reserve rooms for newly born
calves are also included in the cost of building. Birr 271,400 will be reserved to other
operating expense like wages and salaries in the first year. To fulfill the above costs the
venture, total of Birr 300,000 is borrowed from Oromia Credit & Loan Association and
received as gift loan from relatives and friends. The loan will be repaid within four years and
the rest amount of the resource requirements will be contributed by the venture partners in
accordance with some percentage proportion.

7.3. Financial Strategy

The business prepares different type of strategies so as to possess and use its financial
resources properly. The cash generated from the operation of the business should be managed
or dispersed to meet the priory strategies of the venture i.e. expansion and growth and to pay
liabilities before dividends. The business follows holding cash only in required amount for
running the business well.

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7.4. Assessment of Risk and Contingency

7.4.1. Risk
Among the expected risk for our business the following are screened out.

 The shortage of rain that results in shortage of grass which in turn increases the price
of grass;
 Nonexistence of capital for expansion;
 The involvement of other strong investors in the market;
 The management or any other failure in Sebeta Milk Processing Company to whom
we supply our product;
 The acceptability of powder milk might surpass our natural product;
 Lack of adequate information about potential customers.

7.4.2. Contingency Plan

As alternative strategy to protect occurrence of the above risks we should take the following
measures.

 Using appropriate medical treatment like vaccination for our cows;

 Providing quality products to compete and sustain in the market;
 Gathering information about the financial position of our competitors;
 Adjusting our price accordingly by looking the price of related products like powder
milk;
 Searching alternative raw material sources;
 Adapting alternative new technologies;

Generally, all these are the plan of Sebeta milk supply to penetrate into the market through
supplying quality product for potential customers with relative price and to sustain by
strengthening the competence of the company