What are the potential poultry farm business returns with your plan?
The potential risks vs. rewards of a poultry farm must be weight up before making investment decision.
Your ROI is your way of getting back what you put in – plus more.
Without it, the business venture would have been a complete waste of time and resource.
The money invested therefore would have been better off placing elsewhere.
This is otherwise known as ‘opportunity cost‘ (premium resource for premium subscribers only).
With ROI, we’ve got to think security as well as yield.
In other words, as an investor, you carry the risk of:
- losing your money
- not growing your money
So, successful investment depends on profitable decision making.
Let’s take a look at our case study subject, Senthilvela, and the potential ROI of his fledgling organic poultry farm business…
Example
The founder is the principal investor – skin in the game
As business owner, Senthilvela is leading by example as principal investor in his own poultry farm.
By virtue of taking the risks himself to get started, he demonstrates what awaits future investors.
“[Senthilvela started] in 2018 with an investment of Rs. 5 Lakh at a village near Tirukalukundram in Chengalpet district, about 70 km from Chennai, is now yielding an income of Rs 1.2 crore annually.” (Source: The Weekend Leader)
From Rs. 5 Lakh (500,000) initial investment, his farm now turns Rs. 120 crore in annual income.
This would make his initial outlay to start the farm 4.2% of his year 3 annual income.
This is 2,300% income vs. initial capital start-up.
But we cannot use this as an ROI figure.
Why?
- Other rounds of financial injection happened after this 1st investment.
- We don’t know what his poultry farm gross profit figure is.
- We don’t have a comparative rate of interest to produce a discounted cash flow for his poultry farm.
Doubled land capacity
“Eventually, Senthilvela started his poultry farm on a 1.5-acre land he took on lease from a friend with 200 chicks in a 450 sq. ft. shed…He regularly pumped in money into the farm, which is now spread over three acres with a 7,000 sq ft shed.” (Source: The Weekend Leader)
Our case study subject started on a friend’s plot of land with only 1.5 acres.
He kicked off with 200 chicks and a shed that provided the advised 2.5 sq. ft. per bird.
With more personal money injected, he affordably doubled his land capacity.
What knock-on effect has this had on his output of product?
55x the production output
By upping his land twice gave Senthilvela the confidence to increase production of birds, eggs and chicks by 55x.
“He regularly pumped in money into the farm, which is now spread over three acres with a 7,000 sq ft shed. He rears around 11,000 chickens and sells approximately 40,000 eggs, 2,500 live chicken and 1,500 chicks per month.” (Source: The Weekend Leader)
Sales growth
Even during the pandemic, Senthilvela has set a 2020-21 income growth trajectory of 20%.
This will be based on year on year (YoY) comparison and customer sentiment:
“Senthilvela, 45, whose business is set for a 20 % growth during 2020-21 despite the
50 to 60 wholesalers from Tamil Nadu, Karnataka, Kerala, and Andhra Pradesh.” (Source: The Weekend Leader)
Supply & demand
Our case study subject, Senthivela, estimates that he’s only meeting 5-6% of the current demand in Chennai.
i.e. he could sell MUCH more (at least 20x the product) IF his farm had greater capacity.
If he could recruit his cooperative production partners and pivot to contract farming, he has a chance at converting the interest into profit.
“There’s a huge unmet demand.”
“If a small farmer can raise 50 chicks of native breeds on his 10 to 15 cents of land, he can easily make around Rs 400 every day.” (Source: The Weekend Leader)
From experience of the market, Senthilvela has a hunch that a new producer with only 50 country chicks can make Rs 12,000 per month ($163.26 at current exchange rates).
Not a bad poultry investment proposal for potential coop partners.