This document provides an overview of considerations for evaluating the feasibility of starting a range poultry business. It discusses examining personal and family circumstances to determine interest and fit. A marketing analysis evaluates demand, while a production analysis confirms the operation can be done successfully. Profitability and financial analyses determine if the business can make money and be afforded. Feasibility studies help identify potential issues before investing in a business plan and expansion. Planning increases chances of long-term success for new agricultural enterprises.

1. Growing Your Range Poultry Business:
An Entrepreneur’s Toolbox
Written for Heifer International by Anne Fanatico, National Center for Appropriate
Technology and David Redhage, Kerr Center for Sustainable Agriculture. With
contributions by Nancy Grudens Schuck, Wayne Knoblauch, Judy Joanna Green, and Mary
Saylor.
October 2002
Table of Contents
FOREWORD AND
Foreword ....................................................... 1
Using the Toolbox ......................................... 2
ACKNOWLEDGEMENTS
Introduction ................................................... 3
Feasibility. ..................................................... 6 This Toolbox was produced by the National
Personal & Family Considerations Center for Appropriate Technology (NCAT)
and Choosing an Enterprise..................... 6 and the Kerr Center for Sustainable
Marketing: Will it Sell? ................................. 8 Agriculture as part of a Heifer International
Production: Can it Be Done? ..................... 13
project to enhance the opportunities to
Profitability: Will it Make Money?............... 22
Financial Reality: Can You Afford expand range poultry businesses.
to Do It? .................................................. 26
Developing a Business Plan From the The three-year project also examined the use
Feasibility Study ....................................... 26 of mobile processing units (MPUs) for
Record Keeping .......................................... 28 poultry. MPUs are an infrastructure
Assistance and Resources ......................... 28
Working Together........................................ 29 development tool for establishing small
Producer Profiles......................................... 31 regional processing plants to serve range
References .................................................. 34 poultry producer groups. A state-licensed
Appendix A: Decision Tree ......................... 40 MPU was built in Kentucky. Issues
Appendix B: Pasture Pen Budget ............... 46 surrounding meat inspection regulations
Appendix C: Net-Range Budget .................. 50
Appendix D: MPU Budget ........................... 53
and infrastructure were examined in
Appendix E: Small Plant Budget ................. 55 Alabama and Mississippi. The project
Appendix F: Sensitivity Analyses ................ 59 included additional reports on nutrition,
Appendix G: Project Summary.................... 61 stock, custom processing plants, and legal
issues. Refer to Appendix G: Project
Summary for more information.
NCAT and the Kerr Center thank the
Community, Food, and Agriculture Program
and the Natural Resource, Agriculture, and
Engineering Service at Cornell University for
permitting adaptations from the booklet
Farming Alternatives: A Guide to Evaluating the
Feasibility of New Farm-Based Enterprises
(1988) (see References section to order). The
authors of that booklet are listed along with
Photo by Luke Elliott the primary authors of this Toolbox.
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2. Special thanks are also given to Luke
Elliott of Blue Mountain Farms and Chan USING THE TOOLBOX
Zuber of Pickwick/Zesco Co. for their This Toolbox is written for anyone who
contributions. desires to make a profit from range poultry
production, whether by direct-marketing
This project was funded by the Sustainable “pastured poultry,” building a processing
Agriculture Research and Education plant, or working cooperatively with other
program, Southern Region. producers. The audience includes:
The National Center for • New producers
Appropriate Technology is a • Existing producers who want to expand
nonprofit organization with • Individuals
offices in Butte, MT, Fayetteville, • Groups
Arkansas, and Davis, CA, that has • Small processors
programs in sustainable agriculture,
energy, and communities. NCAT It is not written for contract poultry growers
promotes the economic well-being and who work with large companies; they
quality of life of urban and rural residents generally cannot consider another poultry
while working to conserve America’s enterprise because they are already
natural resources. committed.
This Toolbox can help you:
The Kerr Center for Sustainable
Agriculture is a nonprofit education • “Pencil out” a range poultry enterprise
foundation in Poteau, Oklahoma • Determine the profitability of an
with a mission to encourage existing enterprise
sustainable agriculture. • Understand the basics of feasibility and
business planning
Heifer International is a • Find additional information and
nonprofit organization assistance
dedicated to community
development through sustainable livestock Limitations of the Toolbox:
production. The headquarters is in Little
• You should seek additional information
Rock, AR.
and assistance to do a thorough
feasibility study, business plan, or
marketing plan.
• You will need to do lots of legwork.
• This publication does not provide
technical information on production,
processing, and meat inspection
regulations, but it tells you where to get
it.
Photo by Karen Machetta
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3. • The focus of this publication is licensed process-
broilers but much of the ing plant. The
information can be applied to consolidation of
turkey and egg production the meat pro-
cessing industry
Budgets are a special feature of this in recent years
Toolbox. Range poultry budgets are A small-range operation can be a has resulted in
good business.
usually limited to small-scale “pastured fewer plants that
poultry” operations that use on-farm will do custom processing, which limits the
processing, but this Toolbox provides opportunity for small producers to sell
budgets for different scenarios based on inspected meat. This situation leads
the production system and the type of individuals and groups to consider building
processing. Worksheets provide a a plant. In a 1999 NCAT survey of range
template to help you with number- poultry producers, 82% said they intend to
crunching. expand their businesses, and 38% were
interested in building a government-licensed
processing plant 1.
INTRODUCTION Small range poultry producers who live in
There is growing consumer interest in states where exemptions allow on-farm
pasture-raised poultry products, and many processing without inspection and who get a
small-scale producers have established good price from local markets have a real
successful enterprises. These producers advantage. They must think hard about a
take full advantage of federal exemptions decision to expand. Expansion brings with it
that, in many states, permit farmers to sell the risks of a substantial investment in
1,000 broilers per year directly to processing facilities and ties up working
consumers without inspection. These capital.
operations are usually seasonal, closing
down in winter. Producers net about $2.00 Enterprises are often stretched to the
to $3.00 per bird and make a small breaking point by lack of labor and capital.
supplementary income. See ATTRA’s Planning is a crucial entrepreneurial skill
Sustainable Poultry Production Overview for needed to avoid this strain. Planning is tied
details. to goals, so first be clear on what your goals
are. You can use the Range Poultry Decision
Some producers are content to stay small, Trees in Appendix A to help you make
but others want to expand to earn more decisions.
money. They usually need access to a
If you plan to limit your enterprise to small-scale production with on-farm processing and
direct marketing, you may be interested only in parts of this Toolbox, such as the Budgets
(located in the Appendices). For those planning to move beyond direct marketing, the
sections on feasibility and business planning are particularly important. This Toolbox
focuses on feasibility—the business plan will be much easier if the feasibility work is done
first.
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4. Not planning, or “grow as you go” “Pastured poultry” is an easy business to
enter. According to pastured-poultry founder
Some range poultry producers do not plan
Joel Salatin in Virginia, you can get into
for profit because it is not really a goal. In
production for the price of one $200 pen and
fact, money is not always one of the main
$500 for a used or homemade scalder/picker
reasons people farm. Range poultry
set-up. Run four batches of 100 birds through
production may have other, indirect
the pen and, even with 10% mortality, you
benefits, such as improving pasture
will pay back the $700 investment the first
fertility, increasing farm diversity through
year and still have $400 cash after paying the
an enterprise with low entry costs,
costs of feed and chicks3. (This assumes you
establishing a family work ethic, involving
can sell your chickens for $6.50 each.) This
youth, and so on. Many range poultry
assessment reflects the low entry cost, though
producers are in operation because they
it does not include the cost of management
passionately believe in the product, the
and labor.
system, or the philosophy. For some it is a
hobby and they gain personal satisfaction
Most producers recommend starting small if
from producing and selling the product
you are processing on-farm and direct-
directly to customers 2.
marketing. Processing is hard work—it will
“buckle your knees,” according to one
producer.
Using a Mobile Processing Unit (MPU) is a
way to start small and spread the equipment
cost among a group of producers. It offers the
chance to develop the product, test market,
and iron out production problems. The group
can later establish a small permanent plant.
Range poultry production is a way to build
community. Photo by Heifer International.
Producers who process on-farm and direct
market often see a real limit to the amount of
Some producers do accounting after sales
birds they would even want to produce since
to see if they made a profit—too late to
it is a very labor-intensive enterprise. Many
plan. Some do not keep records at all and
do all the labor, from brooding and grow-out
may not know how much money they are
earning from their range poultry
enterprise.
Many producers who direct-market grow
only in response to customer demand.
Since these producers are not taking as
high an investment risk as someone
building a government-licensed plant,
feasibility and business planning is not as
important to them. Mobile Processing Units are shared by small
producers. Photo by APPPA.
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5. to processing and marketing, as well as all may neglect the marketing side of the
the management involved in dealing with business.
hatcheries, working out feed
A feasibility study looks at “make or break”
arrangements, evaluating processing
issues that would thwart a sound business.
equipment, and so on. In addition, the
It also provides a framework to be used in a
poultry enterprise is often part of a
business plan.
diversified farm with other enterprises that
require time and effort. The desired level
Planning will
of production for these farmers may be no
help ensure
more than 1,000 broilers per year because A feasibility study success and
that is all they currently have time for. looks at “make or guide decision-
Year-round production may also hold little
break” issues that making. Like
interest. Outdoor processing on the farm
is not an option in winter because of cold would thwart a sound other start-up
business. businesses, new
temperatures—plus, the winter break is
range poultry
usually welcome. If these producers do
operations face
expand, they probably need to do it in a
challenges and may have a high failure rate.
different way. For example, they could
For most new businesses, “only 20% of start-
join a collaborative group that has a central
ups are in business after 5 years”4. A
processing facility and just raise birds.
business plan will help guide your decision-
making; it includes analysis of how the
Larger-scale production is more difficult to
business will work and plans for operation
enter. The risk is higher but the potential
(marketing, production, human resources,
is there for higher income.
finances, etc.). It is also a written document
necessary for obtaining a loan and sharing
Feasibility and Business Planning with potential partners, but “the really
Many farmers are not familiar with important thing about this process is that it
feasibility studies, business planning, or forces you to think”5. It is more important
marketing plans. A producer who has a for the producer than anyone else, including
great track record in terms of production loan officers.
may not have strong planning skills or
Most producers start with a “mind map.” It
is the unwritten plan that directs your
activities and contains untested hypotheses
and assumptions. It differs from a business
plan in that it is not based on research6. It is
a start—and a very important start—but
formal planning will fill in blank spots in
your information. “A plan not written down
is only a dream we hope will come true.”
Planning is important when expanding a According to Luke Elliott7, former owner/
poultry business. operator of a small USDA-inspected
processing plant, “It can be easy to market
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6. your first 1,000 to 1,500 birds directly off
the farm. People actually seek you out and
PERSONAL AND FAMILY
come to the farm. Beyond that, it is CONSIDERATIONS AND
important to develop a marketing plan, to CHOOSING AN ENTERPRISE
work with other producers, and to make
certain of the legality of your situation.” Questions about you, your resources, your
preferences, and your potential tend to get
overlooked. Why embark on an enterprise if
FEASIBILITY you don’t have time or if
“Feasibility” is a broad term and the it would stretch your
methods for determining it vary. A family resources too far?
feasibility study may examine technical, Is the whole family
economic, market, and social feasibility. interested? Do you have
For many producers, small-scale the skills and experience
production constitutes a feasibility study— necessary to do it? What
a test run for production and marketing at are the strengths, assets,
a larger scale. and interests within your
Make sure the whole
family is committed family? Someone may
This Toolbox uses (with permission) the to the poultry be the natural marketer.
business. Photo by
outline and concepts for feasibility studies Gwen Roland. Is your goal
from the award-winning booklet Farming supplemental income or a
Alternatives: A Guide to Evaluating the farm centerpiece that supports you8?
Feasibility of New Farm-Based Enterprises8.
The discussion of feasibility in this Toolbox Inventory:
illustrates the following concepts with When deciding on an enterprise, it is
range poultry examples: important to consider the farm resources you
have, or refer to farm inventories you have
• Personal and family considerations done in the past. Inventory the following:
• Marketing—Can you sell it? ⇒ Land: What are your physical
• Production—Can it be done? resources? Describe your tillable land,
• Profitability—Will it make money? pasture, and water resources. Will you
• Financial—Can you afford to do it? use the land concurrently for both
poultry and cattle or other enterprises?
If you prefer a worksheet format for your ⇒ Buildings, machinery, equipment,
research, Farming Alternatives has many and other farm resources: What is the
useful ones. condition of the facilities and
equipment? Can you rent or borrow
Other useful resources are Is Your machinery or storage facilities? Do you
Agribusiness Project Feasible?9 and A Primer have freezing capacity? Are there
for Selecting New Enterprises for Your Farm10. useful by-products you have access to?
⇒ Management and labor needs: Who
will perform management duties such
as decision-making or supervising?
Page 6

7. Who will do the necessary labor to look out for profitable
raise birds, process, book-keep, etc. enterprises that can be
How much labor will be required? easily and sustainably
Does the enterprise use existing labor incorporated into their
in off-seasons? Is seasonal labor systems. A producer who
available? is already grazing cattle
⇒ Marketing resources: How can you may decide to add range
distribute your product? You may be poultry since the land is
able to create your own market, but already available. This is
What kind of
what are the markets presently buildings are called a supplementary
available? What are the options for already available on enterprise since it uses
your farm? Photo
direct marketing? Do you have road by Steve Muntz. existing labor and
frontage, a farm store or stand, facilities. A complementary
storage capability, or a farmers’ enterprise actually benefits other enterprises.
market? What are the resources For instance, a cattle producer might
beyond direct marketing? Are there consider a range poultry enterprise in light
slaughtering/processing facilities of its contribution to pasture fertility for
and wholesalers? What is the nearest cattle forage. Products can have
town? What is the population within complementary marketing relationships.
a 30-mile radius? Poultry and eggs are products that direct
⇒ Financial resources: How much marketers use to attract customers to the
money are you and your family farm, who then buy pork, beef, vegetables,
willing to put toward a new and crafts.
enterprise8?
However, over-diversification is a danger for
Enterprise preferences: family farms. This can happen fairly easily
Planning can allow you to choose the job given that many “sustainable agriculture”
you want to do. enterprises are relatively inexpensive to enter.
Luke Elliott7 recommends that if you expand
You may be set on a range poultry to the point where you are building a plant,
enterprise that includes raising day-old do not try to continue doing all the
chicks, processing them on your own farm, production, processing, and marketing
and then marketing the dressed birds to yourself. Consider collaborative
customers from your farm. You may want arrangements.
to produce eggs or turkeys as well as
chicken. You may be interested in establishing a state
or federally licensed processing plant—more
On-farm processing and direct marketing a small agribusiness than a farm-based
can be a good combination for small business—and custom processing for
producers. It requires equipment, labor, producers. Processing can also be
and know-how for processing, but there diversified. Being set up for beef, pork, or
are no travel costs to a processing facility wild game could allow a processing business
and no custom processing fee. to operate year-round. Value-adding by
Many diversified farms are always on the further processing—for example, making
Page 7

8. sausage—could be another business is not a market for the product, there is no
opportunity. economic reason for continuing with the
feasibility study8. The outline used in this
As you move from on-farm direct section is adapted from Farming Alternatives:
marketing to a more “off-farm” enterprise, A Guide to Evaluating the Feasibility of New
the business gets more complicated. For Farm-Based Enterprises.
example, consumer demand, meat
inspection regulations, and poultry
processing capacity and location all affect MARKETING—WILL IT SELL?
the ability of an off-farm enterprise to
make a reasonable level of income11. It Some questions you need to answer are:
becomes tricky when you try to make this What ARKETING—Who will buy ELL?
M are you selling? WILL IT S the
a primary enterprise. A rule of thumb is: product? What is the best way to market it?
either stay small or collaborate. How will you distribute it? What is the
demand? How strong is the competition?
Collaborative efforts can also allow more What are future trends likely to be? What
job specialization. You may prefer to raise prices are you likely to receive? What volume
birds for a group and avoid processing and are you likely to sell8?
marketing. Or you may prefer to do
producer education for the group. In the A market should be secured before
future, you may decide to focus on production begins; on the other hand, it is
breeding, hatching, milling feed, pullet- difficult to market until you have a product.
raising, processing, or some other Poultry meat and eggs in particular require
specialized stage of production, or on planned production and marketing because
marketing poultry products. You might they are perishable2.
even focus on by-products, such as
composting poultry offal from processing. Product Definition
You may realize that your resources are Define your product by looking at the
better spent in an enterprise other than following areas:
range poultry. For example, many of the Product and service features:
considerations for a poultry processing Describe the product, noting its range of
plant are similar to those for milk sizes and other characteristics8. For
processing. Would you and your family
prefer making cheese to processing
chickens? Refer to ATTRA’s Evaluating a
Rural Enterprise for more options on types
of enterprises.
Marketing is one of the first areas to
consider in evaluating feasibility. You
need to understand your market, your
competition, and relevant consumer
trends, and you need to be able to project If there is no market for the product, there is no
need to continue the feasibility study. Photo by
potential sales volume and prices. If there Luke Elliott.
Page 8

9. example, will your pasture-reared • Primary research—do-it-yourself8.
chickens be sold as broilers or
roasters; natural or certified organic; Secondary research:
There’s not a lot of published data for
fresh or frozen? Describe any related
innovative products such as range poultry,
services. Will the birds be whole or
but the amount of information on the natural
cut-up? Will you sell parts? (You will
and organic markets—among the fastest-
also need a market for the less-
growing in the food sector—is increasing.
desirable parts.) Will you provide
The Hartman Group in Bellevue,
recipes? Do you have a service-
Washington, conducted a national study in
oriented business such as a custom
the mid 1990s to assess consumers’ attitudes
processing plant or custom roasting of
and behaviors about the food they eat—in
soybeans for poultry feed?
particular, sustainably produced food. They
Marketing season:
Will you provide the product year- found that 52% of consumers want to buy
round? Will the poultry be fresh all “green”12. The organic foods industry
year or will you freeze it in the reached almost $8 billion in total retail sales
winter? in 2000, with 20–25% annual growth from
Benefits to buyer: 1990 to 200013. ATTRA has more information
Identify the real reason someone buys on the natural and organic markets.
your product8. They may buy for
Primary research:
gourmet taste or for welfare—they
Since you cannot find all the answers to your
may find the idea of chickens roaming
marketing questions
free on pasture appealing. They may
through secondary
also buy for health reasons (e.g., to
research, plan on
avoid the growth promotants used in
conducting some do-it-
conventional meat production).
yourself research8. Some
Capsule description:
common methods of
Put it all together8. Example: “Pasture
primary research are
King Farms offers fresh pastured summarized below. You
broilers in season, and frozen broilers may even be able to get
in the winter, to customers who enjoy Calling customers.
students from a local
the taste of birds raised on green business school to help you.
pasture with natural feeds.”
⇒ Observation: Count people, products,
Market Research or events in a way relevant to your
Without hard data, marketing is just enterprise. Your opinion is critical,
opinion. You don’t need special training to especially about your own community.
do market research—it’s a matter of asking Surveys: Do written or telephone
the right questions in the right places8. surveys8. A dot poster is an interesting
Market research methods can be divided way to survey groups at a farmers’
into: market; participants simply place stick-
on dots on a poster to indicate their
• Secondary research—using existing
preferences.
information on demographics,
consumption, future market trends, etc.
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10. ⇒ Personal interviews: Interview
chefs, potential buyers, and others8.
The interviews can double as a
promotional technique. You
probably already know the white-
tablecloth restaurants in your area;
Zagat’s14 restaurant guide, can help
you identify them in other cities.
⇒ Test marketing: sell your product on Restaurants that serve haute cuisine usually
require fresh product.
a small scale to evaluate potential
sales8. Many producers use a small
operation as a test market for larger income household, has a college education,
production. and belongs to a health club.
Your research will inform the issues you Besides selling directly to consumers, you
need to address in assessing your market. may plan to sell to restaurants, brokers,
stores, etc. Talk to these potential customers
Assessing Your Market to find out what they want. For example, a
To understand and assess your market, store may require a year-round supply of
examine the following topics. inspected poultry at a particular volume.
How well do you know the restaurants you
1. Target Market Descriptions want to sell to? Oregon producer Aaron
“Your ‘target market’ includes the people Silverman15 suggests marketing to chef-
or businesses that you are trying to attract. owned restaurants that offer seasonal, haute
Understanding the characteristics of a cuisine.
target market can prevent costly mistakes
in developing and promoting your In addition to natural foods stores, consider
product”8. family-owned specialty stores or meat
markets.
Describe the demographics of people you
want to sell to (age, sex, family status, 2. Marketing Options
income level, class, occupation, children, You need to decide what methods you will
marital status, ethnic group, education). use to get the product to your markets8.
Do your customers live primarily in a Producers who
certain area or region? Lifestyle patterns sell directly to
(common interests, values, behavior, consumers use
personality types, attitudes, buying on-farm sales,
motives) are important8. Typical buyers of farmers’ markets,
range poultry products are health- special events
oriented; potential customers may belong Customers may come directly to
such as fairs,
to a health club or they may be runners. A your farm to buy pasture-raised roadside stands,
chicken.
sample demographic statement is: the the Internet,
typical range-poultry buyer is a married mail-order, etc.
female with two children, lives in a two-
Page 10

11. marketing with other producers. “Certain
market channels may require larger volumes
or longer seasonal deliveries than can be
provided from an individual operation” (10).
Other partners, such as local retailers and
consumer groups, may have a shared
interest in developing market opportunities
for the product.
Attractive packaging for range poultry
products in France. It is not prudent to have only one market
outlet. What kind of commitment have
You also can sell directly to restaurants, buyers made? Personal relationship is
stores, schools, or other institutions or sell important, but you may need a contract with
to them wholesale through brokers or area buyers in order to expand your
distributors. A broker does marketing for capacity. You don’t want to increase your
you and checks that the store is properly production only to have your customer
presenting your product. Small brokers in decide not to buy. Producers who direct-
your community may serve only a few market to individual consumers have the
businesses. Large natural foods advantage of many market outlets.
distributors include Tree of Life and
United Natural Foods. Can you meet the requirements for serving
your markets?
You might decide to join a collaborative
• What does the packaging need to look
group such as a cooperative. Market
like? Will you need to bar code
development may depend on shared
products for stores?
• Distribution is especially important:
Fresh vs. frozen meat Will you need to transport your product
Fresh and frozen meat are two to the market? What is the distance? Do
different markets and require different you have a truck? Can you load it fully?
distribution channels. Consumers are Don’t underestimate the importance of
accustomed to seeing only fresh meat distribution or, as Luke Elliott says,
in most supermarkets, but many “Don’t drive 200 miles to sell 25
natural foods stores do not have a chickens.”
fresh meat counter. Restaurants • Consider market entry: How will the
usually prefer fresh meat delivered
product be introduced to the market?
once or twice weekly. You can sell
Will it be marketed under the
fresh meat to restaurants and then
market frozen meat as a secondary producer’s name or the processor’s
product to other channels. There is a name? What kind of advertising and
stigma against frozen meats, but it promotion will get the buyer’s
may be possible to establish a attention?10
marketing strategy that promotes a
frozen sustainable product over a 3. Existing Market Demand
fresh, unsustainable product. How many potential buyers are included in
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12. Related publications available from ATTRA (free of charge):
Sustainable Poultry: Production Overview
Organic Livestock Feed Suppliers
Range Poultry Housing
Pastured Poultry: A Heifer Project International Case Study Booklet
Legal Issues for Small-Scale Poultry Processors (a Heifer Project International
publication)
Label Rouge: Pasture-Raised Poultry in France
Profitable Poultry: Raising Birds on Pasture (A SAN publication)
Poultry Processing Facilities Available for Use by Independent Producers in the Southern
Region
Feeding Chickens
Stock
your target market at this time? What is are your projections for market trends in the
the average purchase or frequency of next five to 10 years?8
service per buyer per year? What is the
total purchase or number of services per Possible trends include:
year” (8) ? Small producers who market • More cut-up products and parts: Some
directly to consumers report good demand producers are finding that the same
for their product. educated, sophisticated customers that
buy their pastured poultry also demand
4. Competition convenient cut-up products.
Analyze your competition: business • Natural and organic markets
reputation, estimated sales volume, quality continuing to grow in conventional
of product, price, customer satisfaction, grocery stores.
appearance, type of buyer targeted, • More distinction in the marketplace:
strengths, and weaknesses. A “direct Range poultry products may need to be
competitor” offers the same product you further distinguished from conventional
do. “Indirect competition” is anything products in the marketplace. The
your customers can substitute for your conventional industry has reduced the
product8. Although range poultry is a use of routine medication in feed in
different product, conventional poultry
may compete indirectly. In fact, there is a
lot of consumer confusion about natural
products. Consumers may not understand
the difference between pastured poultry
and an industrial specialty product from
Petaluma’s or Tyson’s organic line.
5. Market trends
Has consumption been increasing? Is the
Cut-up chicken will be important for
number of competitors increasing? What specialty products in the future.
Page 12

13. response to public concern, and is Three books are popular among poultry
getting involved in “free-range” and producers:
organic production. Producers who Pastured Poultry Profits17
market directly to customers can Free-Range Poultry Production
educate them about the products, but and Marketing18
as producers move beyond direct Chicken Tractor19
marketing, opportunities such as
slow-growing genetics and air-chill of production, quality, service, convenience
processing can help to further provided, and types of buyers targeted8.
distinguish products.
• More emphasis on grassfed meats: Farmers tend to underprice their products.
Organic production has been co-opted According to Silverman, charge the highest
by large industrial companies, but few price you can from the beginning 15. “When
use truly land-based production you first start, there are so many
systems. The industry is able to fulfill inefficiencies you can’t charge the real price
organic certification requirements at a because no one would buy it. If it all sells,
much lower cost than the small the price is too low. At least 10% of people
grower. However, the industry should walk by shaking their heads.”
cannot produce a grassfed poultry
product the way a small producer It is important to know how pricing affects
with mobile housing can. As your profit margin—good record-keeping
consumers catch on, they will look for and profitability analysis will help.
grassfed products, which have
different nutritional qualities or 7. Expected sales volume
higher omega-3 fatty acids. Grassfed What minimum number of units could you
meats can be more of an opportunity sell in a poor year? In a good year? What
for small producers than for large would create these conditions? What is your
industrial ones. expected sales volume? How long will it
• Consumer education: More specific take to build the market to the desired sales
definitions of outdoor poultry volume?8
production systems by USDA will
help reduce confusion so consumers
can make informed choices, as will the
development of certification programs
PRODUCTION—
that have consumer education CAN IT BE DONE?
components.
For many, the easiest and most enjoyable
6. Expected price part of poultry production is raising the
There are many formulas and strategies for birds. This section looks at technical, social,
setting prices. What is the lowest price and organizational obstacles to raising and
you could receive? What is the highest processing birds.
price? What conditions would create this?
What is your expected price? Ultimately, In studying production feasibility, you need
pricing will reflect your competition, costs to determine if you can reasonably provide
Page 13

14. the product from available resources—you doing an internship with another farmer can
may discover problems in production. It is provide experience. Refer to ATTRA’s
important to gain “a thorough Sustainable Farming Internships and
understanding of specific production Apprenticeships for more information on farm
practices, required resources, production work opportunities across the country.
constraints, yields, and legal and liability
considerations. If your available resources Production Requirements
cannot adequately support the enterprise, Consider the following production
development may not be feasible. requirements, adapted from Farming
However, many production problems can Alternatives: A Guide to Evaluating the
be overcome by an infusion of labor, Feasibility of New Farm-Based Enterprises.
capital, or ingenuity”8. Climate requirements
Consider the high and low temperatures
Sources of production information and annual precipitation expected on
Range poultry production and processing your farm; list any anticipated climate
require a lot of technical information. As problems8. For example, cold winters in
of yet, land grant universities and the North and hot summers in the South
cooperative extension have limited can limit outdoor poultry production.
information on small commercial outdoor Solutions include seasonal production,
flocks or small poultry businesses. Range- solariums, or seasonal confinement.
poultry producers often rely on each other Rain, wind, and temperature swings are
for information, learning from other also important considerations. Some
successful producers through Internet areas have long wet seasons that limit
discussion groups and other networks. range production.
The American Pastured Poultry Producers
Association (APPPA)16 is a source of Soil and land requirements
information, as is the PasturePoultry What are the soil pH, moisture/
listserver at <www.groups.yahoo.com>. drainage, fertility, and acreage
Sustainable agriculture conferences, trade requirements to grow adequate forage
shows, and equipment suppliers can also for your birds (or cattle and sheep)?
be good sources of information. What does your land provide? List
anticipated problems such as steep
Although you can read materials and terrain that can interfere with moving
books, experience is an even more valuable portable poultry housing. Heavily
resource. Starting a small test operation or wooded areas may increase predator
Common types of outdoor poultry production systems
• Yarding: a stationary house with a fenced yard; buildup of manure and pathogens in
yarding has led farmers to search for ways to rotate pasture.
• Pasture pens: small batches of birds are kept in floorless pens, which are moved daily
to fresh pasture.
• Net-range or “day-range”: a house is surrounded with movable net fencing. The
netting is moved every few days and the house may be moved as well.
• Free-range: portable houses are moved regularly to fresh pasture—no fencing is used.
Page 14

15. pressure. If you are planning a product. Facilities are also required for
processing plant, consider the ability of cold storage and possibly for retail of
the soil to support wastewater systems. poultry products. If you or your group
builds a plant, siting is critical. You will
Water requirements need to transport inputs to the plant,
Consider the water requirements of the transport the product to market, and
enterprise, including the flow rate, transport wastes away. While a rural
volume, and location (g). How does area offers land for wastewater disposal,
the water need to be distributed for transportation is easier and labor is more
production and processing? Are you available in an urban area. Most
on municipal water or a septic system? importantly, put a plant where you are
Evaluate your water quality. wanted. For example, Aaron Silverman’s
plant is in an Oregon town that lost a
lumber mill. Siting in an Empowerment
Zone can provide resources. The
Empowerment Zone and Enterprise
Community program20 is a federal
assistance program that helps
communities with high poverty rates
find opportunities for growth and
What are the water requirements for revitalization, especially entrepreneurial
your operation? Photo by Karen
Machetta.
initiatives, small business expansion, and
training for jobs.
Building and facility requirements
Consider the facilities needed for the When coordinating the stages of
enterprise for housing, processing, production, remember that the
handling, and storage. Is new processing plant is usually the limiting
construction or renovation required for facility and all other facilities (such as the
your existing facilities?8 Housing for hatchery, grow-out, and feed mill) must
range operations is often minimal, built be geared to the processing plant10.
with available resources on the farm.
Processing set-ups are varied. You See ATTRA’s Small-Scale Poultry
could process under a Processing for information on building
tree, use an existing and operating a plant.
outbuilding, build a Equipment and machinery requirements
shed, or even put up a Consider whether you already own the
government-licensed equipment or must buy, rent, borrow, or
processing plant. Or make it8. Consider heaters for brooding,
you could rent a mobile pasture pens (or net fencing and electric
processing unit (MPU). chargers), feeders, waterers, and feed
A mobile processing You could take your storage. You don’t actually need a lot of
unit is a good way to birds to a custom plant processing equipment for poultry; birds
share resources.
Photo by Steve for processing but you are small and there is no need for a track
Muntz. do lose control of the and a saw. Consider carefully before
Page 15

16. buying used equipment; it may not
meet the exact specifications needed
and therefore lead to less efficiency or
higher labor costs21. (Used equipment
may also not satisfy meat inspection
requirements.) At what point should
equipment be substituted for labor (the
“mechanical transition threshold”)? Equipment like an egg grader can
Keep replacement parts around for reduce labor.
emergencies and keep future
equipment upgrades in mind. in poultry production systems that
improve efficiency and profits. It
Marketing equipment may be needed, takes many hours of management
such as a refrigerated truck or trailer to time to gather information on breed,
transport dressed birds to market. Also hatcheries, feed suppliers, affordable
consider supplies such as litter to raise processing equipment, and so forth.
birds on and bags for marketing. If
you are milling your own feed, you If you are building a plant, you will
may need a grinder, mixer, and roaster. put in lots of management hours
going over regulations, design, and
other aspects. For operation, small
plant managers need an impressive
array of skills—including electrical,
plumbing, knife sharpening—to
maintain the plant and equipment,
especially for emergency breakdowns
during processing. In addition to
supervising the facility and ensuring
compliance with regulations, the
processing-plant manager might be
expected to monitor performance,
judge quality, buy live birds, oversee
Equipment should be accounting-office functions, oversee
appropriately scaled to your
operation. Photo by Paul waste disposal, and be a marketing
Helbert. and salesperson. Many producers
underestimate the amount of time and
Management and labor requirements effort needed for marketing8.
⇒ Management: The function of ⇒ Labor:
management is to plan, organize, How much labor will the day-to-day
direct, staff, and control. activities of raising, processing, and
Considerable knowledge and marketing poultry, and keeping
diverse skills are needed. Managers records, require? The philosophy of
should keep abreast of innovations free-range and organic poultry
production often reduces the options
Page 16

17. for automation, resulting in very experienced farmer spent only 10
labor-intensive operations, minutes per chicken from chick to
especially with processing2. Direct processed bird; a less experienced
marketing requires substantial labor farmer worked more than an hour per
to build a customer base and bird.
maintain a database to track them.
⇒ Labor efficiency:
The size of the operation is the main
determinant of labor efficiency2.
Producers need to spread labor costs
over a larger number of birds to
increase output per labor unit. (See
the Sensitivity Analysis discussion
under the Profitability section.)
Some automation may be needed to
Pasture-raised poultry can be very labor optimize labor input. Automation
intensive.
reduces time needed for feeding,
watering, cleaning, and other
⇒ Labor budgets:
activities2, but requires more capital
Record the management and labor
investment.
hours you will need for your
operation. As a guide, the budgets ⇒ Labor source:
in the Appendices of this Toolbox The farmer’s own unsalaried labor is
include management and labor often a large part of the labor in a
hours needed for the four different small poultry operation. Family labor
production and processing scenarios is common; however, kids cannot be
described; however, these are not expected to work as hard as adults.
detailed labor budgets. You will
need to modify them to fit your
situation. Make a chart of labor
activities on the farm for each month
to determine if there is time
available for a new or expanded
enterprise8. Since many poultry
producers have diversified farms, it
is important that the poultry
enterprise complements rather than Automation can optimize labor input but costs
conflicts with the labor peaks of more.
other farm enterprises. Consider
what type of chore cycle will work Hired labor is required for some
for you: steady work or intensive activities. Many producers have
bursts of work. trouble obtaining processing help on-
call in rural areas, and it will not be
According to University of
trained labor. An Oregon company
Wisconsin estimates22, one
has considered an unusual option:
Page 17

18. using prison labor to run a spent- Uniformity and consistent quality
fowl plant.
Although uniformity in bird size is not as
important in manual processing as it is in
Later, in a business plan, you can be automated processing, it is still an issue.
more specific, naming who will be Consistency can be very important in your
on your management team, market. For example, your restaurant
including salaries and benefits. You accounts may demand a range of 3.5 to
may also need a hiring and training 4.5 lb. birds every order. Silverman found
policy. How will you promote and that his birds varied so much in weight—
maintain good labor relations, because of the heavier finished weight of
strong morale, and high-quality males compared to females—that he
output from workers? Handling of switched from straight-run chick orders to
employees is an important issue. cockerels only. When feed rations change
dramatically, it can change the quality of
Show that you have organized your
the meat. Feeding more corn will result in
staff needs23. If you incorporate, more yellow color in the bird and different
you will need to name a Board of fatty acids and flavor in the meat
Directors. compared to wheat feeding. Meat from
birds confined in winter will differ from
Additional production requirements meat produced outdoors in spring. The
production system used also has an effect:
⇒ Supply:
birds tend to grow faster in pasture pens
Consider your supply sources8. For
compared to net-range systems because
year-round production, chicks are the feed is right in front of them all the
harder to source in winter. time. However, birds are often injured
Sourcing suitable feed ingredients when pasture pens are moved, and there
can be difficult. If you have may be more broken wings. Weather,
difficulty finding a reliable supplier forage, weed species, and other
of chicks, feed ingredients, feed environmental factors have an impact on
rations, or other needs, you may the consistency of poultry in land-based
want to consider becoming a production systems.
supplier yourself.
⇒ Reliable supply: you. What kind of future-supply
If you have a processing plant, assurance do you need? Are contracts
consider how you will get a necessary? A reliable supply is crucial
sufficient supply of live birds to when you are committed to fill an
support the plant year-round. What order.
will the travel time be from the farm
to the plant? Will you raise all the When working with multiple growers,
birds yourself? If not, survey you will need to require standardized
producers in your area to determine production practices, including stock
whether they can provide an selection and feed formulation. You
adequate supply of birds. However, may need to develop a producer
local producers may prefer to education program and have them
process on-farm and market their start out small. Silverman limits
own birds instead of working with
Page 18

19. not permit flocks to be more than
seven days apart in age on the same
farm.
You might plan to operate your plant
as an independent custom
processor—rather than collaborate
with a group. However, the financial
risk of building a plant will be high if
you aren’t sure that enough
These birds are non-uniform in growth.
producers will want to use your
processing services to make your
beginning growers to 1,000 birds plant profitable (and to keep cash
their first year of production. flowing).
⇒ Logistics of working with multiple
growers: Because the storage capability of
For a plant that processes 120,000 most small plants is limited, you will
birds per year, if the average grower most likely need to move and market
produces 5,373 birds/year, there your product quickly. If you don’t
will need to be a minimum of 23 have a lot of freezer capacity, you
growers close to the plant. The may be able to rent freezer space
production schedules of these elsewhere.
growers must be coordinated so that
birds arrive at the plant for Quality and production rate
processing at staggered times What is the level or range of quality you
instead of all at once. Harvesting an expect to achieve? How does your quality
entire flock at a time allows you to compare with your competitors’? What rate
manage the flock as a unit. This of production do you think you can
“all-in, all-out” approach also has achieve?8 Range-poultry producers usually
health advantages: in multi-age plan on an eight-week grow-out period
flocks, older birds can carry diseases using the commonly available fast-growing
that younger birds are susceptible broilers. However, specialty slow-growing
to. On the other hand, the grower genetics may take 12 weeks to grow out,
can “skim” flocks to fulfill market which reduces the number of flocks a
orders that require a range of sizes. grower can raise per year.
Biosecurity measures (footbaths,
disinfecting of vehicles, traffic Processing rates depend on many factors.
control, etc.) are important for On-farm processors typically handle 10
reducing the spread of disease when birds per hour from kill to chill (i.e., a crew
working with multiple growers. If a of four could process 40 birds per hour),
plant has a truck that picks birds up excluding set-up and clean-up time and
from different farms, the truck packaging. In a small processing plant,
should visit younger flocks before Kansas processor Diana Endicott24 estimates
older ones. Some supply chains do that an experienced crew of four can
Page 19

20. process a bird from kill to box in four Legal, regulatory, and liability factors
minutes (15 birds per hour), excluding set- The Legal Guide for Direct Farm Marketing25 by
up and clean-up time and paperwork. attorney Neil Hamilton is an excellent
MPUs have more set-up and take-down resource for information on legal, regulatory,
time than other options. and liability issues.
Poultry usually dress out at about 67% of Legal:
live weight at processing (without giblets), The Legal Guide for Direct Farm Marketing
but track your yield. It affects your bottom has information on legal structures for
line, and different batches may yield your business (e.g., sole proprietorship,
differently. partnership, limited partnership,
corporation, limited liability company
Business size [LLC], or cooperative). When working
You might want production to equal the with a collaborative group, formal
expected sales volume you determined arrangements such as contracts are useful
from your market research8. However, for smoothing operations and for legal
growing a business in stages could be and financial protection for all. You may
more feasible. want to find an agricultural lawyer (a
county clerk or a lawyer referral service
Expected Sales Volume = Maximum can help).
Average Production Rate Business Size8
Regulations:
Business size is expressed in terms of birds Regulations you will have to follow
raised per year on farm or number include rules for meat inspection,
processed per year, week, or day. If you environmental impact, and labor.
are planning a big investment, it is critical
to make an accurate estimate of your Meat inspection regulations are
business size. “Once you’ve determined notoriously difficult for small poultry
the maximum size of the enterprise, you producers, and an “unclear legal
will take into account the availability of environment increases risk”8. All meat
your resources”8. and poultry sold in the U.S. is inspected
by federal or state inspectors (27 states use
There may be certain economic thresholds their own state meat-inspection program).
where you need to either produce at a low However, federal exemptions allow
volume or commit to a higher volume. In- custom processors and small producers of
between is no-man’s land. As mentioned less than 1,000 birds per year or less than
before, size is also related to labor 20,000 birds per year to process a limited
efficiency. Paperwork for 10 birds or 500 number of birds without bird-by-bird
birds requires the same amount of time. inspection. In states that do not have a
Set-up and clean-up take time, regardless state meat inspection program, the federal
of volume. See the Sensitivity Analysis in exemptions apply, but they are not
Profitability section. recognized and interpreted the same in
these states. States that have state meat
inspection programs do not recognize the
exemptions. Legal Issues for Small Poultry
Page 20

21. Producers26 was developed by Heifer outdoor poultry operations. On these
International and summarizes meat smaller, dispersed farms the manure is an
inspection regulations on a state-by- asset rather than a liability. However,
state basis. It is available free from composting of mortalities may be an issue
ATTRA or at for small producers.
<www.apppa.org>.
In the plant, you need to think about
Operating under federal exemptions for disposal of offal and wastewater. Small
facilities that process less than 20,000 on-farm processors usually compost offal
birds per year usually requires an and apply wastewater to their land, but
enclosed building that meets state on a larger scale, composting of wastes
building codes, with smooth washable such as offal, feathers, and blood is time-
walls and floors, an approved waste consuming and subject to regulations.
system, a restroom, etc. Under federal Large amounts of wastewater “cannot
regulations, poultry processing plants simply be discharged into lakes and rivers
also must have a Pathogen Reduction because of the relatively high content of
and HACCP program. organic matter such as protein and fat and
the microorganisms present28.“ Processing
Certification programs: plants may need at least initial water
Certification programs have many treatment before discharging into a
requirements but can be good municipal sewage system. Or more
marketing options. Certified organic extensive water treatment facilities may
production is now subject to the be required—breaking down dissolved
regulations of the USDA National organic matter by microorganisms—
Organic Program27. If your annual before final discharge to sewer, streams,
gross sales are less than $5,000, you are or land. One small processor
exempt from certification but you still recommends siting your plant in a small
must follow the rules and keep records city that needs jobs and has a good sewer.
for a possible audit.
Environmental and Labor
Regulations:
Operators must also comply with
environmental regulations, and an
environmental assessment may be
needed.
On the farm, you need to think about
Regulations for wastewater management
disposal of mortalities and litter. The are strict.
conventional poultry industry’s
disposal of litter by field application is You may also face labor regulations such
increasingly regulated, and nutrient as minimum wage, workman’s
management plans are becoming compensation, and Occupational Safety
common. This is not an issue for most and Health Administration (OSHA)
Page 21

22. regulations on ergonomic issues. It is Consider social issues in your feasibility
important to be aware of such study. Is this a socially acceptable
regulations on federal, state, and local enterprise? The conventional poultry
levels. You may have to deal with industry must deal with difficult social
several agencies, including USDA, your issues such as fairness to contract growers
state department of agriculture, your and high turnover in processing plants,
state department of health, your state including immigrant labor.
depart-ment of environmental quality,
and local agencies. Remember that it Will establishing or expanding this
takes time to jump through regulatory enterprise bring you profits? “Profitability is
hoops. the measure of the return your business
receives after operating costs and other
Liability: expenses are subtracted from income”8.
Liability coverage is important for your
protection. If you have an existing farm
liability policy, just add a rider. A PROFITABILITY—
stand-alone policy may be more
expensive. WILL IT MAKE MONEY?
Contracts are useful for certain To project whether the enterprise will be
production and marketing profitable, the farm manager should
arrangements. If you are setting up complete an income statement. An income
contracts with other growers, check statement lists income and expenses for a
resources such as the Livestock given time period, usually a year. “The
Production Contract Checklist29. income statement lists all business receipts
(cash and non-cash payment received from
A good resource for small poultry the sale of goods or services or other sources)
producers is economic information and expenses (operating expenses and
from the University of Wisconsin22. depreciation) related to the year’s
Based on data gathered from production. Expenses are then subtracted
experienced farmers, labor for a from receipts, and the amount remaining is
1,000-bird-per-year enterprise is net farm income.” Net farm income
20−22 hours per week over a four- represents the return to the operator’s labor
month production schedule, and the and management time, unpaid family labor,
farmer can expect hourly earnings of and equity capital8.
about $10 per hour. Based on this
analysis, they also created a model
Estimating expenses
for a 5,000-bird enterprise, which
would require 35−42 hours of work There are two types of expenses:
per week over a six-month
• Capital costs: Relatively major
production schedule. With a net
income of $18,000, an experienced purchases that are made infrequently.
farmer could expect to earn about Examples include land, processing
$12−∃18 per hour11. equipment, a building for processing,
poultry housing, etc.
• Operating costs: Recurring expenses
Page 22

23. that are a regular part of the Note: With the exception of the Pasture Pen
production cycle. Examples include and Net-range budgets, the cost of
feed, chicks, utilities, and interest and marketing is not included, so don’t forget
principle payment on debt for capital that the expenses of brochures, signs,
costs. samples, advertising, calling prospective
buyers, delivery routes, certification fees,
Increased capital purchases expose you to and so on can be high.
greater financial risk, while increased
operating costs can put you at a The numbers in the budgets were compiled
competitive disadvantage8. by the primary authors, and drawn from
several producers. The figures do not apply
Budgets for building your income to a particular producer. Pickwick/Zesco30
statement are provided in the Appendices. provided the prices for processing
They will help you figure costs. There are equipment.
four budgets for different scenarios, based
on the type of production system and the Using the budgets:
type of processing: Use the budgets as general guidelines.
There is space to write your own estimates.
• Appendix B: Pasture Pen Budget:
Costs will vary depending on the individual
Pasture pen production with on-farm
circumstances of your operation. Range
processing.
poultry production is still a new enterprise,
• Appendix C: Net-range Budget: Net-
and variations in performance, expenses,
range or “Day-range” production with
overhead, market prices, and condition of
custom processing.
buildings or equipment will affect the
• Appendix D: Mobile Processing Unit bottom line.
(MPU) Budget.
• Appendix E: Small Processing Plant You can use the budgets individually. The
Budget (Capital budget and operating Pasture Pen Budget in particular is designed
budget). for an individual producer. In the other
budgets, however, the areas of production,
Lowering fixed costs by using a plant at full capacity
Normally, a plant should be used at full capacity to be financially viable (i.e., at least 40
hours per week, 50 weeks per year)33. “A large portion of the financial obligation of the
plant is in fixed costs: the physical structure of the building and the equipment. While
variable costs, such as utilities and labor, can be reduced during periods of shortages, the
cost of the capital investment does not change”21. If you cannot use the facility at full
capacity with only poultry, you may want to consider a multi-species facility. However,
your state may not allow red meat and poultry in the same plant. Some producers use a
facility at partial capacity—even just one day per week. In this case, the facility should
have low fixed costs because these costs will be there every day of the week. It is
important to project when the plant will operate at full capacity. If you plan to build a small,
simple facility, build it so that you can expand later (especially the waste management
system). For an example of a sensitivity analysis of capacity utilization of a small
processing plant, see Appendix F.
Page 23

24. processing, and marketing are handled as Blue Mountain Farm Prices
separate profit centers or businesses that
an individual or a group can put together. Store Price Wholesale
With the pieces working independently of Price Delivered
each other, an enterprise may not be Whole $2.15/lb $2.50/lb $2.15/lb
profitable. Working with a collaborative Chicken
group can lower the cost of the enterprise.
Cut-up $2.35/lb $2.50/lb $2.35/lb
A collaborative group may not require
Chicken
each profit center to actually make a profit.
For example, the processing plant may just Boneless $6.50/lb $6.75/lb $5.50/lb
break even; the profit will be made when Breast
the group markets the product.
Turkey $2.25/lb $2.99/lb
Some notes on costs:
and only available as a computer
• Feed prices affect profitability a lot
spreadsheet. Contact Don Schuster31.
since feed is the major cost of
production; organic feed is especially
Sensitivity analysis
expensive.
• Mobile housing has a higher annual It is important to ask “what if” questions.
depreciation cost per bird because it Proponents of unique enterprises tend to be
does not last as long as permanent too optimistic about potential income. You
housing. need to ask: “What if prices are 25% below
• Marketing costs depend on the my estimates? What if I have a weather
market. A common rule of thumb is problem? What if it takes twice as much
that 3% to 4% of total income will be labor as I think?”10. What if a lot of chicks
spent on marketing costs. die? “Since you know the future is
uncertain, you may want to examine
Since many small-scale poultry operations different possible price and yield scenarios
are complementary enterprises on and see how your strategies perform”32.
diversified farms, you may be able to
charge some of the costs to other A sensitivity analysis is used to determine
enterprises. For example, the tractor that how changes in various assumptions change
moves your portable houses may also pull the costs of production and processing,
a plow. which in turn will affect the profitability of
an enterprise. Make allowances for worst-
Estimating income case scenarios. After sensitivity analysis is
complete, you may want to make
Most direct marketers charge $1.50–$2.50/ adjustments to your income statement to
lb. for whole carcasses. Larger marketers reflect the effects of such changes8.
have more complex pricing. Important production costs and
determinants of profitability are:
Another budgeting tool for range poultry
enterprises is available from the University • Feed cost: “Feed consumption is
of Wisconsin. It is a very detailed budget directly related to the quality of the
Page 24

25. production is possible through capital
investment, automation, and
collaboration between producers,
particularly in the area of packing,
processing, and slaughtering2. See
Appendix F for a chart from the U.K.
showing the profitability of organic
table bird production units of different
sizes.
A plant should be used at full capacity to be Break-even analysis
financially viable. Photo by Steve Muntz.
Break-even analysis determines the profits
possible at various levels of output. “Break-
rearing environment, including
even calculations will show the level of
housing insulation and time spent on
production where the enterprise can cover
range in cold weather”2. Organic feed
operating costs for alternative output prices,
is especially expensive.
wages, and costs of raw product”9 . Some of
• Finishing age and the price per bird : the budgets show break-even analysis and
If you plan to raise a slower-growing the unit cost of production (i.e., per-bird
bird (such as a Label Rouge-type bird) cost).
it will cost more to get it to the same
live weight as a fast-growing Cornish FINPACK is a computer program for
Cross. Although many direct markets financial analysis. Many Extension agents
will not sustain the higher price have it and can help you learn to use it.
needed, other markets may2. There are numerous publications and
• Operation size and cost efficiencies: Extension fact sheets on preparing and using
Profit generally increases with scale financial statements.
since larger units can spread out
overhead costs. Input costs such as How much profitability do you need?
feed and chicks, transport, processing,
packaging, and marketing also tend to It may be that using the numbers in the
be higher for small producers because Toolbox’s budgets do not result in
of the small quantities involved2. profitability in your income statement.
Producers try to lower costs by buying
in bulk, charging a premium price, Profitability measures include net returns
and using family labor2. However, per bird, net returns to labor and
small units may not be profitable management, and dollars earned per hour of
unless the poultry is processed on- labor11. A 17−25% margin is often needed to
farm and direct marketed. “Smaller cover fixed costs. The level of profitability
units require less capital investment, you need is related to whether or not you
but housing and labor costs per bird include your labor as an expense. If you do,
are generally higher than in the case of then 0% profitability could be acceptable—
larger units where economies of scale the enterprise breaks even and you have
may be significant”2. Larger-scale made a job for yourself. The level of
profitability is also related to your standard
Page 25

26. of living. Some families draw a lot more that you need to know your monthly
on an enterprise for their living expenses payments on a loan for this exercise.
than other families would and therefore
require a higher profit. Most businesses do not turn a profit for the
first few years. “A new enterprise with a
payoff in five years may look good strictly
FINANCIAL REALITY— from a profitability standpoint but may not
pay the bills between now and then”10.
CAN YOU AFFORD TO DO IT?
One of the most critical items for a small Obtaining financing
business is having enough cash to meet You may need to borrow money to start or
needs throughout the year. Even a expand your range poultry enterprise.
profitable enterprise can be sunk by cash- Lenders want to know: “What is the business
flow problems. You need to know how idea, and what evidence can you offer to
much cash will be needed for day-to-day show that there is a market and that it is
expenses (operating costs, family living likely to turn a profit”8? They also need to
needs, and debt payments) and where the know the amount you want to borrow and if
cash will come from (e.g., customer you can repay the money. Financial
receipts, borrowing, membership equity, institutions look at the “5 Cs” (character,
other). If sufficient cash is not available, cash flow, collateral, conditions, and
cash flow analysis will tell you the amount capital—the owner should be putting up
of debt you can afford8. 30−50% of the capital needed5. If you are
working with a cooperative, can you raise
A cash flow analysis is a summary of the the necessary investment capital from your
amount of cash that flows into and out of members? It can be hard to identify sources
the business over a given period, generally of financing for nontraditional enterprises.
one year. Monthly or quarterly cash flow Besides borrowing, you can pursue
statements showing the timing of cash investors, business angels, or venture capital.
flow are especially critical in an
agricultural business, which is seasonal in
nature8. Winter bills must be balanced out
DEVELOPING A BUSINESS PLAN
with summer revenue.
FROM THE FEASIBILITY STUDY
By completing a cash flow statement the
manager can determine the amount of You have gathered a lot of information about
capital needed to finance the business, as your proposed idea; most of the legwork is
well as the repayment ability of the already done. If the result of the feasibility
business if money is borrowed8. study is positive, incorporate the work you
have done into a business plan.
You should develop a current cash-flow A business plan can help you get
statement and a series of projected cash- government or foundation funding. It is a
flow statements for the first and second communication tool to attract the interest of
years, and for a future average year. Note collaborators and stakeholders. The
audience is not only investors and bankers
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27. but also your family, stockholders, in the conventional poultry industry,
directors, managers, employees, suppliers, restrictions on routine antibiotics. Small
government, manufacturers, transporters, single-plant chicken companies may be
and wholesalers and customers. Most on the outs in the conventional industry,
importantly, the business plan is a but these plants are an opportunity for a
planning tool for you. A business plan small niche company.
guides decision-making for the farm • Threats: conventional poultry industry,
business. It will not sit on a shelf after government policy
completion. A business plan is an
operational tool to put your ideas into The operational plans for business functions
practice23. can be filled in by the work already done in
the feasibility study.
Business plan
• Market plan: (use the information from
A business plan includes a business your Market Section)
description and an assessment of the • Production plan: (use the information
environment/market in which you intend from your Production Section feasibility
to operate, along with the operational study)
plans for business functions such as • Human resource plan: (use the
marketing, production, human resources, information from your Labor and
finances, and so on. The business Management Section under Production)
description is “a brief description of the • Financial Plan: (use your income
Mission Statement, Business Goals, statement and cash-flow analysis)
Business Background, Business Structure,
and Management Team”23. It contains You can also add a title page, executive
target customers and markets, principal summary, and appendices that include
products and services, geographic domain, resumes of business owners or key
technologies used, philosophy, and desired personnel, agreements, etc.
image. A business plan assesses strengths,
weaknesses, opportunities, and threats to Some business plans are 25−35 pages long,
the business (SWOT). Range poultry with 10−20 pages of appendices23. However,
SWOT examples: they do not have to be long.
• Strengths: image, good taste and A Canadian website has a tutorial on
texture business planning as well as a several sample
• Weaknesses: expensive business plans, including one for a broiler
• Opportunities: concern about business, at
Genetically Modified Organisms <www.agf.gov.bc.ca/busmgmt/> . Many
(GMOs) in food production, concern books available on small business include
about “mad cow” disease, growth in information on taxation, zoning, labor and
eco-labeling programs such as employment, insurance and liability, and
organic, interest in animal welfare, entrepreneurial skills. Extension has
increasing environmental regulations materials on farm business and agribusiness
management.
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