Quillstine Farm’s Start-Up Business Plan

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Section 1: Executive summary

Quillstine Farm is a new firm that specializes in the rearing of poultry for eggs and meat and pigs for pork. The business plan explains how the company will spend a capital of 200 million to start up the business. The objective is to enable the management of this firm to understand opportunities in the market and to use its strengths to capitalize on them while at the same time managing existing risks. The mission of the firm is to offer customers quality poultry and pork products at competitive prices. The success of the firm will be determined by its ability to create a pool of loyal customers through the delivery of quality products. The financial analysis of this firm shows that the company will break even within the third year of its operations.

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Section 2: Business Overview

Quillstine Farm is a family-owned business that has its headquarters in Ibadan, Oyo State in Nigeria. It is run by a husband, a wife, and a brother who have their duties clearly defined. It specializes in the rearing of poultry for eggs and meat. It also rears pigs for pork to supplement its income. It sells these products directly through its outlet stores located in major cities across Nigeria such as Abuja, Ibadan, Pork Harcourt, Lagos, Kano, Kaduna, and Benin City. The firm also sells these products through dealerships, which finally deliver these products to retailers around the country. The start-up has experienced significant growth over the past year because of the commitment of the owners of the firm. In this business plan, the goal is to conduct a market analysis to understand external forces that may affect its growth and assess the firm’s operational plan and financial plan. The business plan also assesses risks that the firm face as it seeks to achieve sustainable growth in the market.

Section 3: Market Analysis

Conducting a market analysis is critical, especially when a firm is operating in a highly competitive industry. The poultry industry has experienced massive growth over the past two decades. The growth is attributed to the rapid urbanization in the country, general population growth, economic growth, and a culture that emphasizes the consumption of white meat because of its health benefits. This section will provide a clear understanding of the challenges that the industry faces, segmentation and market trends, and marketing strategy that this firm can implement to achieve the desired growth.

Industry Analysis

When conducting a market analysis, one of the first factors that one has to consider is industry analysis. Schmid (2018) explains that an industry analysis makes it possible for the management of a firm to understand external forces that may affect its ability to achieve growth. Porter’s five forces model, shown in figure 1 below, is one of the tools that can be used to assess the poultry industry. The model starts by assessing the degree of competitive rivalry in the market. When there are numerous players in the industry, the level of competitiveness will be high. That is the challenge that Quillstine Farm is facing. The number of firms offering the same products in the same market is high. Some of the top competitors in this market include Shadron Foods Nigeria Limited, Elkris Agro-Development Nig Ltd, and Agroneeds Nigeria Enterprises. It means that pricing is one of the strategies that they have to use to manage the stiff competition.

The bargaining power of buyers is another factor that has to be considered when assessing the attractiveness of the industry. When customers have the opportunity to choose from a wide range of customers, they tend to be demanding. They will want to pay less for more because of the wide variety of other brands in the market. The poultry industry in Nigeria is facing this challenge as many companies target the same customers. Some of the organizational buyers with strong bargaining power include supermarkets such as Addide Supermarket, Best Choice Supermarket, and Escapade Supermarket. It means that customers have the power of choice.

The power of suppliers is another factor that has to be considered when assessing an industry. McWilliams et al. (2019) observe that when a single firm is responsible for supplying a specific product, they will have immense power to define terms of sale, especially on pricing. Most of the suppliers of food and medical products for poultry in Nigeria lack that power because of their high number. It is also easy for organized firms such as Quillstine Farm to have its own food production for its poultry. As such, the power of suppliers is significantly low.

The threat of substitute products is another major concern that firms in this industry have to address in their operations. When customers have a perfect alternative to a given product, then they can easily switch their loyalty when they feel that their interests are not met effectively (Galpin, 2020). The poultry industry is not faced with the threat of a perfect substitute. A client who likes chicken cannot consume meat instead. This is another major advantage that Quillstine Farm should take advantage of as it seeks to achieve growth. The last factor that has to be considered in this model is the threat of new entrants. When other firms can easily make an entry into the industry, it means that the competitive rivalry can get worse. The process of starting a poultry farm is relatively easy, which means that the level of competitive rivalry can get higher, especially when the market continues to grow.

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Porter’s Five Forces
Figure 1. Porter’s Five Forces

Challenges Facing the Poultry Industry

The poultry industry faces numerous challenges that the management of Quillstine Farm should be ready to face. One of the greatest challenges that players in this industry face are the emergence and re-emergence of diseases. When there is a major outbreak of a disease, a farmer can lose all the animals or most of them. The financial loss that arises from such cases may not be easily recovered. Some of the common diseases that affect poultry include coliform infections, mycoplasmosis, and fowl cholera (Penniman, 2018). The cost of managing these large farms is another challenge. As Samet (2018) advises, the poultry has to be vaccinated regularly and offered the right food that meets the standards set by the veterinary doctor. There is also the cost of energy as the chicks have to be housed at a specific temperature.

Starting a poultry farm is a capital-intensive venture. The proprietor must have a significant amount of capital to start a successful poultry farm. The problem is that in some African countries such as Nigeria, there is always little support from the government (Jean et al., 2020). Small scale farmers have to finance their business from their savings or loans from friends and family members, especially in the early years of operation. When a firm succeeds in getting a loan from local financial institutions, the terms of the agreement only favor the financial institution at the expense of the borrower. The little profit that the firm makes goes into the payment of the loan.

Security still remains a major issue among poultry farmers across Africa. In Nigeria, cases have been reported where extremist groups such as Boko Haram attack and overwhelm villages. In such cases, the affected people would lose their assets to the criminals. Although the government has made an effort to fight crime in the country, there is still a constant threat of a possible attack on this farm. It is also important to note that poultry farmers in the country have failed to form a strong union that can help facilitate research and fight for the rights of these farmers in the country. As such, the government has failed to enact policies that can specifically address the challenges that these farmers face.

Market Segmentation

When developing a marketing strategy, one of the most important factors to consider is segmentation. A firm can identify different market segments and then identify a specific one that can meet its needs in the most effective way possible. In the poultry industry, the main segments are indigenous and hybrid chicken. The hybrid chicken has gained massive popularity because of the short period that it takes to mature. On the other hand, the indigenous chicken has remained popular among consumers because of its original taste and the belief that it is a healthier product than the alternative. Quillstine Farm should focus on the production of indigenous chicken for eggs and meat. Although they take longer to mature, they fetch better prices in the market. As the number of health-conscious consumers continues to increase, the demand for these products is set to increase significantly (Oseni, 2018). The management can opt for a small number of broilers to supplement its income, but it should not be the main product.

Target Market Segment Strategy

When the market has been segmented, the next step is to target a specific segment that the firm can take full advantage of based on its capabilities. As suggested above, Quillstine should target the indigenous birds market because of its level of attractiveness and the likelihood that it will grow even further. When targeting this segment, the firm should be ready to expand its farm to enable these indigenous birds to roam freely as opposed to having cages, which are popular among broilers and layers. The farm should also have an effective marketing strategy that will convince customers that they offer the best quality services in the market.

Market Trends

Assessing market trends is another major activity when analyzing the market. According to DePamphilis (2019), consumers’ tastes and preferences often change depending on various factors in the market. At one point, the hybrid eggs were popular because of their prices and the short period that it took for the layers to be ready. Their meat was also popular during that period because of the same reason (Waters, 2019). However, the market trends are changing as indigenous chicken is becoming more popular. These birds and their eggs have proven to be more nutritious and healthier than the alternatives. Monitoring these market trends is critical because it enables the management to redefine operations of a firm appropriately depending on customers’ needs and preferences.

Marketing Strategy and Implementation

Quillstine Farm will need an effective marketing strategy that will enable it to take advantage of the existing opportunities in the market while at the same time managing threats that it faces. Successful firms have learned the significance of understanding market forces and then developing strategies that can allow them to operate without facing any major challenges. The agricultural sector may pose unique challenges as opposed to the industrial sector. The following are the main areas where the firm will need to develop and implement strategies that can enable it to attract and retain loyal customers.

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Marketing Strategy

Marketing is one of the areas that many agricultural institutions often ignore. McWilliams et al. (2019) argue that many farmers believe that they only need to produce their foodstuffs and make them available in the market. However, it is important for them to promote their brands and products to ensure that they have a pool of loyal customers. Quillstine will need to use both the mass and social media platforms to promote its products and brands. The mass media has become less popular in modern society, especially the use of magazines and newspapers because of their reduced circulation. However, this firm can still use television and radio platforms as a means of reaching out to its customers. However, a significant amount of its budget should go to the social media market.

Social networks and viral marketing are some of the most effective business-to-consumer (B2C) marketing strategies. Facebook offers it a perfect platform through which it can reach out to a large number of customers within the country. YouTube is another popular social media platform that is popular in Nigeria. Other platforms include Instagram and Twitter (Hewitt, 2019). In its marketing strategy, the firm should position its products as being natural and healthy for everyone. They should emphasize the fact that they mainly focus on indigenous chicken for meat and eggs.

Pricing and Promotion Strategy

Pricing is another strategic move that the management should make with care. Fazey (2020) explains that when a firm sets a high price for its products, it may lock out numerous potential customers who may not afford the product. However, it will also be passing a message that its products are of the best quality in the market. On the other hand, when the price is low, the product will be affordable to many customers. However, the low price will give an image that the quality that the firm offers may be compromised. To avoid the disadvantages of premium pricing and below market average pricing, Quillstine will need to settle on a price that is slightly above the market average. The strategy will ensure that the product is as affordable as possible to the majority of customers while still maintaining an image of high quality.

Sales Strategy

The management of Quillstine will need an effective sales strategy to avoid cases where production takes too long to reach the market. Eggs are very delicate and they need to reach the market within a specific period before they perish. Similarly, once the chicken leaves the farm, they have to be fed until such a time that they are sold to clients, which increases the cost. Sales efficiency is, therefore, of great importance in reducing the overall cost per unit of the product. The firm already has stores in major urban centers around the country. It will also need to increase the number of dealers around the country. To avoid conflict of interest with the dealers, the firm should embrace a sales strategy where dealers buy the products at the various outlet stores around the country. These dealers will then be responsible for the final delivery of these products to customers. To ensure that these dealers do not sell products of other farms, they should bear the brand name Quillstine Farms and commit to the firm that they will not sell products of other firms.

SWOT and PESTEL Analysis

The analysis of the firm would be incomplete without conducting a SWOT analysis. The analysis makes it possible to understand how a firm can use its capabilities to take advantage of opportunities in the market while at the same time managing threats. The main strength of Quillstine Farm is that it has the financial capital needed to start operations. As shown in the analysis below, the budget for the firm is slightly over 130 million nairas while the firm has at its disposal 200 million nairas. The fact that it is just starting its operations means that it is flexible enough to conform to emerging market trends. It also has a small team of the management that can easily make important operational decisions. However, its main weakness is that it has limited experience in the market. There is also the fear that family differences may affect its operations.

The biggest opportunity in the market is the growing market for the products that this firm offers. The overall population of the country is increasing, and at the same time, and at the same time, the demand for white meat because of its health benefits is on the rise. These factors will push up the demand for Quillstine Farm’s products. The growing economy of the country means that the number of those who can purchase these products is also increasing. The improved infrastructure in the country makes it easy for the firm to deliver its products to the market. The market also has some threats, top of which is the stiff competition from rival firms offering similar products. There is also the possible interference from government officials who may have personal interests. Security concerns in some parts of the country are another major concern. Table 1 below identifies these factors.

Table 1: SWOT Analysis

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Strength
  • Access to financial capital
  • Flexible in its operations
  • Small manageable team
Weaknesses
  • Possible family differences
  • Limited experience in the market
Opportunities
  • Growing poultry and pork market in the country
  • Growing economy in Nigeria
  • Improved infrastructure
Threats
  • Security concerns
  • Stiff competition
  • Possible interference from government officials

PESTEL analysis focuses on the analysis of the macro-market beyond the industry within which a firm operates. The political environment in Nigeria has been stable over the past three decades despite claims of electoral malpractices (Fazey, 2020). A stable political environment is suitable for the growth and normal operations of this firm. The economic environment is another important ingredient for a firm’s success. The country’s economy has been growing steadily over the past two decades. The purchasing capacity of individual citizens has increased significantly within the same period, and the growth is expected to continue.

The social environment often determines trends and preferences in the market. A significant population of Nigerians is Muslims, which means that they cannot consume pork. However, eggs and chicken meat are universally accepted products in the country, which explains why they were considered the main products for the firm. The emerging trend of health-conscious customers will also increase the popularity of this firm’s products. Technology is another instrumental external environmental factor that will affect the firm’s operation. Quillstine Farm will need to embrace modern technological trends in the production, promotion, and sale of the products. Ecologically, the firm has a responsibility to ensure that its operations do not affect the environment. At the same time, it will have to learn how to deal with challenges that arise from climate change and global warming. The legal environment is the last factor that has to be taken into consideration by the firm’s management. It has to ensure that the company is duly registered and that its operations are in line with policies set by various governmental authorities.

Section 4: Operational Plan

When the firm starts its operations, it will need to ensure that it puts into place a system and structure that will allow its activities to run without any disruptions. Issues such as staffing, the organizational structure, and inventory management have to be planned carefully. The roles and responsibilities of all these stakeholders should be clearly stipulated to avoid cases of overlaps and omission of tasks.

Staffing

The management of Quillstine will need to have a clear staffing plan that will meet its human resource needs. The husband, wife, and brother are currently holding different responsibilities. However, it will be important for the management to hire more workers who will be responsible for the logistics, vaccination and feeding the chicken, collecting eggs, slaughtering pigs and hens when necessary, maintaining books of account, and other tasks. The recommended strategy is to hire employees based on demand. When the two vans are purchased, it will be necessary to have two drivers. The moment the new chicken and piglets arrive, the firm will need to hire many employees who will be responsible for various tasks. They should be hired based on merit depending on the department in which they are expected to work. The firm should consider hiring host country nationals (HCNs) unless it is necessary to recruit experts from foreign countries.

Organizational Structure

The firm will need an organizational structure that defines the hierarchy of the management unit. A simple organizational structure will be used at the initial stage of the operation. At the top will be a general manager responsible for defining the vision and mission of the firm. There will be a company lawyer to provide critical advice to the management unit. Then there will be departmental heads of the chicken unit, pig unit, finance unit, human resource, and logistics. Each departmental head will have employees responsible for various tasks.

Organizational Structure
Figure 2. Organizational Structure

Inventory Management

The management will need to embrace effective ways of managing inventory. First-in, first-out (FIFO) has emerged as a popular strategy for managing inventory. Using this strategy, the firm will ensure that those products that have matured (pigs and chicken meant for meat) are sold as soon as they are ready. Similarly, eggs collected should be delivered to the dealers around the country within the shortest period possible. The goal is to cut the cost of warehousing, minimize wastage, and reduce cases of theft.

Section 5: Financial Plan

The management of Quillstine Farm will need to have a financial plan that defines how it will spend the available resources in various activities. As Fazey (2020) suggests, it is always advisable for a start-up to have a budget surplus because there may be unforeseen eventualities that may affect the normal operations of the firm. As shown in Table 2 below, the company has a capital of 200 million but the total cost is about 120 million, leaving it with a budget surplus of about 70 million. Table 3 shows the sales forecast, table 4 projected profit and loss, and 5 is a projected balance sheet.

Table 2: Financial Plan

Start-up Cost Cost (Naira) Capital Amount
A Poultry Owners’ savings 50,000,000
1 Purchase of land (10 acres) 40,000,000 Bank loan 150,000,000
2 Pen 1,250,000
3 Cost of birds 20,050,000
4 Cage 3,600,500
5 Transportation 2,800,500
6 Vaccination 850,000
7 Electricity 1,220,500
8 Motor-van 10,250,500
9 Miscellaneous expenses 8,500,000
Sub-total 88,522,000
B Piggery
1 Cost of piglets 10,110,500
2 Construction of pig house 2,500,000
3 Transportation 3,100,000
4 Vaccination 980,500
5 Electricity 640,500
6 Motor-van 16,500,500
7 Miscellaneous 7,200,000
8 Sub-total 41,032,000
9 Grand Total 129,554,000 200,000,000
G Budget surplus 70,446,000

Table 3: Sales Forecast

Sales Forecast {Naira} Year 1 Year 2 Year 3 Year 4
Poultry 14,000,000 35,000,000 70,000,000 110,000,000
Pigs 3,000,000 16,000,000 28,000,000 51,000,000
Total 17,000,000 51,000,000 98,000,000 161,000,000

Table 4: Projected Profit and Loss

Item Year 1 Year 2 Year 3 Year 4
Sales 17,000,000 51,000,000 98,000,000 161,000,000
Cost of goods sold 10,000,000 24,000,000 41,000,000 68,000,000
Other expenses 1,000,000 6,000,000 11,000,000 16,000,000
Taxes 500,000 2,000,000 13,000,000 26,000,000
Net income 5,500,000 19,000,000 33,000,000 51,000,000

Projected Cash Flow

Item Naira
Operating cash 50,000,000
Sales 17,000,000
Others 8,000,000
Total sources of cash 85,000,000
Expenses
Electricity 1,861,000
Transport 5,900,500
Vaccination 1,930,000
Miscellaneous 15,700,000
Total expenses 25,292,000

Table 5: Projected Balance Sheet

Assets Naira Liabilities Naira
Land 40,000,000 Bank loan 150,000,000
Equipment & Infrastructure 7,350,000 Owners’ equity 50,000,000
Vehicles 26,751,000
Total Fixed Assets 74,101,000
Birds 20,050,000
Pigs 10,110,500
Cash and cash and cash equivalents 95,738,500
Total Current Assets 125,899,000
Total Assets 200,000,000 Total Liabilities 200,000,000

Breakeven Analysis

Break Even Analysis
Figure 3. Break Even Analysis

NPV, ARR and Payback Period

Net present value (NPV) = (Cash flow)/ (1+i)n

Where:

  • i is the discount rate
  • n is the period number

= 17,000,000/ (1+0.08)1

= 17,000,000/1.08

= 15,740,740.74

Accounting rate of return (AAR) = Average net profit/Average investment

= {(5,500,000+19,000,000+33,000,000+51,000,000)/4}/ {200,000,000/4}

= 27,125,000/50,000,000

= 0.54

The break-even analysis conducted above shows that the payback period that it will take the firm to recoup its initial investment is by the end of the third year. However, the firm will be profitable within the first year of operation, as shown in figure 3 above.

Section 6: Risk Assessment

The management of this company should be ready to address various risks that the firm may face in its operations. Financial risks are some of the greatest concerns that the management will have to address. Issues such as inflation, recession, and challenges in the financial sector may affect its ability to have access to financial capital. Health risks is another major problem that the firm may face with its poultry and pig business. Having a reliable veterinary officer responsible for vaccinating the animals and offering other forms of medication is critical. Technological risks may also affect the normal operations of the firm. The management should be keen to monitor emerging technological trends, especially in terms of rearing the chicken and pigs. Having an insurance cover may help the firm to manage unforeseen risks that may cripple its operations of the firm.

References

DePamphilis, D. M. (2019). Mergers, acquisitions, and other restructuring activities: An integrated approach to process, tools, cases and solutions. Elsevier.

Fazey, M. (2020). Human resource policy: Connecting strategy with real-world practice. London Anthem Press.

Galpin, T. J. (2020). Winning at the acquisition game: Tools, templates, and best practices across the M&A process. Oxford University Press.

Hewitt, E. (2019). Technology strategy patterns: Architecture as strategy. O’Reilly.

Jean, A., Subić, J., Grubor, A., & Privitera, D. (Eds.). (2020). Handbook of research on agricultural policy, rural development, and entrepreneurship in contemporary economies. IGI Global.

McWilliams, A., Rupp, D., Siegel, D., Stahl, K., & Waldman, A. (Eds.). (2019). The Oxford handbook of corporate social responsibility: Psychological and organizational perspectives. Oxford University Press.

Oseni, E. (2018). Youth unemployment. The challenges of skill gap. GRIN Verlag.

Penniman, L. (2018). Farming while black: Soul fire farm’s practical guide to decolonizing food, land, and agriculture. Chelsea Green.

Samet, I. (2018). Equity: Conscience goes to market. Oxford University Press.

Schmid, S. (Ed.). (2018). Internationalization of business: Cases on strategy formulation and implementations. Springer.

Waters, J. (2019). Logistics: An introduction to supply chain management. Red Globe Press.

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