Do you want to start dairy farm business?
Have you got some cash to invest and you are planning to start a dairy farm? Well, if that’s the case then you are going the right way.
Dairy products are a compulsory ingredient of our food and there will not be a single home that does not consume dairy products. Another advantage is that people need dairy foods on a regular basis, nearly every day.
The biggest advantage in starting this business, which gives it an edge on other startups, is that it gives us the maximum rate of return on our relatively small investments as compared to other businesses. So, by investing in this business you can make some serious cash on a daily basis.
Despite having all these perks, this business also has a dark side which is its difficult planning at the initial stage. It has got more constraints as compared to the normal businesses out there, that is why before starting it, you need to have a well-structured business plan covering even the tiniest bit of details.
To help you avoid all the trouble of thinking about everything and making a plan yourself, we are providing a detailed business plan of a startup “Milk&Milk” which is soon going to be launched.
2.1 The Business
Milk&Milk will be a registered American dairy farm business based in Spring Valley, a village in the Rockland County of New York, at a 40-minute drive from the center of New York City. Nearly 80 acres of land in the outskirt of village has been selected and acquired as the farm site after detailed market analysis.
The business will be owned and operated by Michael Benrick. Michael did his Bachelors in Agriculture Sciences from Cornell University and Masters in Business Administration from Harvard University. After his studies he worked in several dairy farms in USA ranging from small startups to multinational corporations and has been serving as the operational head of milk production unit in Nestle, USA for the last 10 years.
Michael comes from a farming family and his father is a farmer himself, owning several acres land in the same village. It is partially due to his experience in dairy farm industry and partially due to his similar family business that Michael knows every tiniest bit of detail about how to start a dairy farm.
Milk&Milk is primarily a milk producing company, involved in the breeding of milk-producing animals to produce large quantities of milk for commercial purposes but the company will also produce other dairy products.
Being located in a village, the business will have a continuous supply of all resources including the food for the animals. To manage the animals and resources efficiently, Michael has decided to hire a large workforce consisting of local inhabitants so as to ensure quality of their products.
The company aims to serve whole Rockland County along with a major portion of New York City’s residential zone.
2.4 Target of the Company
Michael’s target is to become one of the best natural dairy products producer of New York City.
3.1 Company Owner
Milk&Milk is solely owned and operated by Michael Benrick who has more the 20 years’ experience of working in leading dairy farm companies, especially Nestle.
3.2 Why the Business is being started
Throughout his serving career, Michael did not feel happy about the mechanical procedures of production of dairy products which resulted in the loss of their natural characteristics. He had always thought to bring innovation in the traditional procedures of production while maintaining the nutrients and natural characteristics in the dairy products. It was last year, when he actually said ‘goodbye’ to Nestle and started working on his own dairy products farm.
3.3 How the Business will be started
Michael worked on his idea for about a year and developed a detailed business plan covering everything, even the future forecasted demands. He took help from his friend, Anna, who is a financial expert in Nestle, and crafted a detailed map about the cost to start a dairy farm.
Michael has forecasted following costs for expenses, assets, investment, and loans for the Start-up.
The detailed start-up requirements, start-up funding, start-up expenses, total assets, total funding required, total liabilities, total planned investment, total capital and liabilities as forecasted by company’s analysts, is given below:
|Research and Development||$3,750|
|TOTAL START-UP EXPENSES||$173,125|
|Other Current Assets||$22,500|
|Start-up Expenses to Fund||$321,875|
|Start-up Assets to Fund||$495,000|
|TOTAL FUNDING REQUIRED||$0|
|Non-cash Assets from Start-up||$118,750|
|Cash Requirements from Start-up||$0|
|Additional Cash Raised||$118,750|
|Cash Balance on Starting Date||$321,875|
|Liabilities and Capital||$0|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$495,000|
|Loss at Start-up (Start-up Expenses)||$173,125|
|TOTAL CAPITAL AND LIABILITIES||$321,875|
Services for customers
Milk&Milk will not only produce milk and other dairy products for commercial purposes but the company also aims to provide various cattle related products and services to its customers. The main services incorporated in its new dairy farm business plan are as follows:
- Production of milk, butter, cheese, yogurt, cream, and other cultured dairy foods
- Production of canned beef
- Farrier and shearing services
- Consultancy services
Marketing Analysis of dairy farming business
The most important and difficult part in developing a good dairy farm business plan is its marketing analysis that’s why Michael obtained the services of marketing experts to help him develop a good business plan. He went through various dairy farming business plan samples before selecting the best dairy farm business plan template to work on.
The success or failure a startup totally depends upon how they market themselves to target their specific customer groups. A successful marketing strategy can only be developed after knowing the target audience and potential customers. Michael has carried out at extensive research with marketing experts to know their target customers and focus their marketing strategy towards them.
5.1 Marketing Segmentation
Milk&Milk will target all customers ranging from individual buyers to multinational retail stores. The marketing experts have identified following type of target audience which can become the potential customers of the company.
The detailed marketing segmentation comprising of the company’s target audience and sale of the dairy packages unit are as follows:
5.1.1 Individual Buyers:
Milk&Milk will open three small retail locations in its initial phase, in the first year of its startup. One retail location will be in Rockland County and the other two will be in New York City. Through these retail locations, the company will target individual buyers residing in these areas who will be needing our dairy products on a regular basis throughout the year.
5.1.2 Departmental Stores:
Milk&Milk will supply its dairy products to various other retail and grocery stores. These departmental stores will make up the bulk of company’s customers and more than half of our products will be sold to them. These stores will also be needing our products on a daily basis throughout the year.
5.1.3 Restaurants and Hotels:
Milk&Milk will also supply their dairy products and beef to various restaurants and hotels on a regular basis throughout the year. These restaurants will become our biggest consumer after the departmental stores.
5.1.4 Companies and Businesses:
Milk&Milk will also supply milk to various companies and businesses based in New York City. The companies need a continuous supply of milk for making tea for their crew on a daily basis. Michael had already been contacted by a few medium sized companies to provide their canned milk on weekly basis.
5.1.5 Dairy Farm Owners:
The company will also provide consultancy and advisory services like farrier and shearing to the various farm owners located in Rockland County.
The detailed market analysis of our potential customers is given in the following table:
|YEAR 1||YEAR 2||YEAR 3||YEAR 4||YEAR 5|
|Restaurants and Hotels||27%||6,323||7,432||8,335||9,322||10,872||15.32%|
|Companies and Businesses||9%||17,342||18,243||20,422||23,482||25,221||15.00%|
|Dairy Farm Owners||1%||10||11||12||14||10.00%|
Milk&Milk aims to become the best dairy products company of New York within next 5 years of its launch and one of the leading dairy farm companies of America within next 10 years. We aim to provide highest quality dairy products to our consumers within affordable prices. We will keep all our dairy products as much original and natural as possible. We will only produce the required amount of products as forecasted by our analysts to reduce the use of preservatives and other artificial additives. Michael has already started planning for his goal of reviving natural dairy products.
5.2 Business Target
At our company, we will also provide a top-notch customer service. Our every employee and salesperson will treat our customers with utmost respect so as to build a long-lasting relationship with them. We will also provide highest quality consultancy and advisory services to the farmers located in the Rockland County.
5.3 Product Pricing
Setting the prices of products is the most difficult part of any business, especially for a risky business like dairy farm. If the prices of our products are higher as compared to our competitors then people would not get attracted towards us, similarly if the prices are lower then it will be difficult to achieve our MARR (minimum attractive rate of return).
Considering all restraints and aspects, Michael has priced some of the products, milk and flavored yogurt, slightly higher than competitor’s products so as to balance the cost needed to manufacture high quality natural products and to avoid financial problems in the dairy farm business management. While most of our products can be bought in nearly the same price as the similar products of other companies.
Planning the sales strategy can be very complicated especially for a person with no prior knowledge. To make a small dairy farm business plan of your own business, you can take help from the sales strategy of this sample dairy farm business plan.
The sales strategy of Milk&Milk developed by Michael and his friend Anna, a finance expert, is as follows:
6.1 Competitive Analysis:
Milk&Milk will have various competitors ranging from small dairy products manufacturers to multinational corporations. Our competitors may have established businesses and low product prices but no one will surpass us when it comes to the quality of products. Our competitive edge over other dairy farm businesses and dairy products manufacturers will be the ‘naturality’ of our products which is lacked by nearly all of our competitors. We are sure that people will prefer our slightly high-priced but natural products as compared to other dairy products available in market.
6.2 Sales Strategy
We will introduce our startup to our target customers and stake holders in the agriculture industry by sending brochures and introductory letters. We will attend all subsequent business fairs, food seminars and expos, and will carry out a large-scale social media campaign for our advertisement. We will send a free sample of our dairy products to several hotels and restaurants so that they can know the superior quality of our products. We will also offer discounts and gifts on our products present in several retail stores.
6.3 Sales Forecast
We believe that if people try our products, they will then use them for the rest of their lives thus the sales pattern will always increase with years. Our customers will be needing our products throughout the year. By analyzing our market segmentation strategy, our experts have forecasted the following sales on yearly basis which are summarized in the column charts.
The detailed information about sales forecast, total unit sales, total sales is given in the following table:
|Unit Sales||Year 1||Year 2||Year 3|
|TOTAL UNIT SALES||5,049,030||5,913,140||7,412,090|
|Unit Prices||Year 1||Year 2||Year 3|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Direct Cost of Sales|
|Subtotal Direct Cost of Sales||$29,410||$69,940||$110,470|
Michael acquired the services of a Human Resource Manager who instructed him how to write a business plan for a dairy farm incorporating the HR aspect. Michael, with the help of HR Manager and financial experts developed the following plan for the staff needed for the company along with their average salaries.
7.1 Company Staff
Michael will act as the Chief Operating Officer of the company. The company will initially hire following people:
- 1 General Dairy Farm Manager to manage the overall operations in dairy farm and the production unit.
- 2 Administrators / Accountants to maintain financial records.
- 2 Engineers responsible for operating and maintaining packaging unit.
- 4 Sales and Marketing Executives responsible for delivering products to retailers and discover new ventures.
- 20 Farm / Field / Packaging Employees for operating the farm and production unit.
- 4 Drivers to transport products to various retail locations, hotels and restaurants.
- 1 Front Desk Officer to act as a receptionist in the company headquarters.
To ensure the best quality service, all employees will be selected through vigorous testing and will be trained for a month before starting their jobs.
7.2 Average Salary of Employees
The following table shows the forecasted data about employees and their salaries for next three years.
|Year 1||Year 2||Year 3|
|General Dairy Farm Manager||$75,000||$85,000||$95,000|
|Administrators / Accountants||$43,000||$51,000||$59,000|
|Sales and Marketing Executives||$45,000||$52,000||$59,000|
|Farm / Field / Packaging Employees||$210,000||$240,000||$280,000|
|Front Desk Officer||$10,000||$12,000||$15,000|
Michael has developed the following financial plan with the help of Anna, which outlines the financial development of Milk&Milk over the next three years. The finance experts helped him to figure out <strong>how much does it cost to start a dairy farm<strong>.
Michael had been planning this business for years and thus had saved up for this venture. That’s why the company will be solely financed by him and he will also control the direction of business to make sure that it is expanding at the forecasted rate. No equity funding or outside loan will be required unless the company expands faster than forecasted.
8.1 Important Assumptions
The company’s financial projections are forecasted on the basis of following assumptions. These assumptions are quite conservative and are also expected to show deviation but to a limited level such that the company’s major financial strategy will not be affected.
|Year 1||Year 2||Year 3|
|Current Interest Rate||10.00%||11.00%||12.00%|
|Long-term Interest Rate||10.00%||10.00%||10.00%|
8.2 Brake-even Analysis
The following graph shows the company’s Brake-even Analysis.
The following table shows the company’s Brake-even Analysis.
|Monthly Units Break-even||5530|
|Monthly Revenue Break-even||$15,974|
|Average Per-Unit Revenue||$26.87|
|Average Per-Unit Variable Cost||$0.89|
|Estimated Monthly Fixed Cost||$19,641|
8.3 Projected Profit and Losss
The following charts show the company’s expected Profit and Loss situation on the monthly and yearly basis.
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
The following table shows detailed information about profit and loss, and total cost of sales.
8.4 Projected Cash Flow
The following column diagram shows the projected cash flow.
The following table shows detailed data about pro forma cash flow, subtotal cash from operations, subtotal cash received, sub-total spent on operations, subtotal cash spent.
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$70,923||$80,610||$90,297|
|SUBTOTAL CASH FROM OPERATIONS||$471,943||$533,651||$595,359|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$471,943||$533,651||$595,359|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$352,396||$395,489||$438,582|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$352,396||$395,489||$438,582|
|Net Cash Flow||$119,551||$138,167||$156,783|
8.5 Projected Balance Sheet
The following projected balance sheet shows data about total current assets, total long-term assets, total assets, subtotal current liabilities, total liabilities, total capital, total liabilities and capital.
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$1,000||$1,000||$1,000|
|TOTAL CURRENT ASSETS||$201,259||$237,468||$273,677|
|TOTAL LONG-TERM ASSETS||$980||$610||$240|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$9,482||$10,792||$12,102|
|TOTAL LIABILITIES AND CAPITAL||$198,839||$232,978||$267,117|
8.6 Business Ratios
The following table shows data about business ratios, ratio analysis, total assets, net worth.
|Year 1||Year 2||Year 3||INDUSTRY PROFILE|
|Percent of Total Assets|
|Other Current Assets||1.75%||2.02%||2.29%||27.40%|
|Total Current Assets||138.53%||150.99%||163.45%||54.60%|
|Percent of Sales|
|Selling, General & Administrative Expenses||74.29%||71.83%||69.37%||65.20%|
|Profit Before Interest and Taxes||26.47%||29.30%||32.13%||2.86%|
|Total Debt to Total Assets||2.68%||1.04%||0.76%||67.10%|
|Pre-tax Return on Net Worth||66.83%||71.26%||75.69%||4.40%|
|Pre-tax Return on Assets||64.88%||69.75%||74.62%||9.00%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||19.20%||21.16%||23.12%||N.A.|
|Return on Equity||47.79%||50.53%||53.27%||N.A.|
|Accounts Receivable Turnover||4.56||4.56||4.56||N.A.|
|Accounts Payable Turnover||14.17||14.67||15.17||N.A.|
|Total Asset Turnover||1.84||1.55||1.26||N.A.|
|Debt to Net Worth||0||-0.02||-0.04||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$120,943||$140,664||$160,385||N.A.|
|Assets to Sales||0.45||0.48||0.51||N.A.|
|Current Debt/Total Assets||4%||3%||2%||N.A.|