This discussion looks at two issues in Poultry business:
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1. How to determine Profit
2. How to improve profitability

The two issues are interrelated, because it is always said that:

“If you cannot measure it, you cannot control it”

The first part is profit measurements while the second part is profit control.

The first part will be discussed in this post while the other will be discussed subsequently.

What is Profit

Profit is the difference between Income and Expenses

Profit = Income- Expenses

Importance of Profit in a Business

• Profit making is the motive behind all business ventures
• Profit is the reward for entrepreneurship and risk taking
• It is the blood that sustains a business
• Any business that fails to make Profit consistently will eventually die.
• No bank or other investor will extend funding to a business not making profit
• Profit provides information about the health of the business-dwindling profit is a sign that the business
is sick and need to be rescued before it is too late.

Importance of Profit Determination Process in a Business

Given the importance of profit in a business, every business owner should put in place a process of profit
determination (profit measurement). This will continually provide information about the health of the business.
The information will assist the owner to take appropriate action before it is too late.
A business might appear healthy on the surface but in actual fact, dying slowly.

Profit Determination in Poultry Business

From the definition of profit, there are 2 variables involves in its determination, income and expenses.
Profit determination is about knowing what the expenses and income of a business are.
While profit determination is easy and straightforward in some type of businesses, it is not so in some others.
Poultry farming business falls into categories of businesses where profit determination is neither easy nor straightforward.
To assist Poultry Farmers overcome this challenge, we present here the procedures for profit determination.
The discussion covers the different aspects of poultry business.

Batch Rearing

Poultry farmers rear their birds in batches. The total profit of a farm is the aggregate profit made from each batch executed
within a period of time.
The profit made from each batch is important to the survival of the farm.

There are 3 types of batches:

1. Meat-Producing Batch (Broilers, Cockerels)
2. Egg-Producing Batch (Layers)
3. Point-of-Lay Batch (Pullets Rearing)

1 Meat-Producing Batch (Broilers, Cockerels)

The birds are raised from day old to market weight and then disposed off either live or processed.
The batch cycle is between 5 to 6 weeks for broilers and up to 26 weeks for cockerels. Broiler bird is
good at feed to meat conversion, hence it is chosen over all other bird types for meat production. A broiler
bird can attain a market weight of between 1.8kg and 2kg in 5 weeks (35 days).

2 Egg-Producing Batch (Pullets)

The birds are raised for the purpose of egg-laying. They are disposed off as “old layers” at the end of the egg-laying cycle.
Income is derived from both the sales of eggs and sales of old-layers. Rearing of layer birds can be done in one of 2 ways:
i. Rearing from day old (DOC)
ii. Purchase at the point-of-lay (POL)

3 Point-of-Lay Production Batch (Pullet Rearing)

Some poultry farmers specialize in raising pullets from day-old to point-of-lay (POL) for sale to other farmers who
want to raise them further for egg production.

1 Profit Determination In Meat-Producing Batch (Broilers, Cockerels)
Profit = Income – Expenses

Expenses

The following expenses are expected to be incurred when raising birds from day old:
i. Pre-delivery Expenses (cleaning, minor repairs of rearing house, etc)
ii. Acquisition Cost (cost of day-old-chicks)
iii. Delivery Expenses (transportation)
iv. Heating Expenses (kerosene, wood shaven, charcoal etc)
v. Feeding Expenses (constitutes between 70-75% of total costs)
vi. Drug/Veterinary Expenses
vii. Labor Costs (attendant)
viii. Generator/Fuelling
ix. PHCN
x. Mortality (up to 5% of number of birds)
xi. Selling Expenses (advertising, phone calls etc)
xii. Processing Costs (if processed before disposal)
xiii. Other Miscellaneous Expenses

Income
a) Income from sales of birds
b) Drawings by the owner (value of birds taken by the owner for PR or personal use)

Steps in Profit Determination

1) Record all Expenses on day-to-day basis as they are incurred.
2) ADD all Expenses
3) Record all Sales Income
4) ADD all Sales Income

Profit from batch = 4) – 2)

For example: If Total Income from Sales of birds = N850,000
and Total Expenses = N600,000
Profit from batch = N850,000 – N600,000 = N250,000

****Note: A detailed Example is worked out in Appendix I

2 Profit Determination In Egg-Producing Batch

2.1 Raising Birds From Day-Old (Pullets)

The Poultry Farmer rears the birds from day-old to point of lay, continues to rear them and derive income
from egg-production. He eventually disposes the birds as “old-layers” at the end of egg-laying cycle. The
whole cycle (from day old to disposal) lasts between 75 to 80 weeks.
The profit determination in this batch is not as straightforward as in meat-producing batch. To determine profit,
the whole batch cycle is divided into 3 phases:

i. Pre Egg-Laying Phase
ii. Egg-Laying Phase
iii. Terminal Phase

i Pre Egg-Laying Phase

This phase covers the period from day-old to when the birds start laying. During this period, the farmer
only spends, without income.

The following expenses are incurred during this phase:
i. Pre-delivery Expenses (cleaning, minor repairs of rearing house, etc)
ii. Acquisition Cost (cost of pullets)
iii. Delivery Expenses (transportation)
iv. Heating Expenses (kerosene, wood shaven, charcoal etc)
v. Feeding Expenses (costs between 70-75% of total costs)
vi. Drug/Veterinary Expenses
vii. Labor Costs (attendant)
viii. Generator/Fuelling
ix. PHCN
x. Mortality
xi. Other Miscellaneous Expenses

All the expenses incurred during this phase will be treated as “Capital Expenditure.”
Laying birds are like “production machine.” The expenses will be capitalized.

For example if the total expenses incured to bring the day old birds to egg-laying stage is N5million,
then N5million is capitalized

ii Egg Laying Phase

This phase commences when the birds start laying eggs. During this phase, the poultry farmer will continue to incur costs
but also derives income from sales of eggs.
This occurs when the birds are between 16 and 18 weeks old.

Expenses during this phase are regarded as “Revenue Expenditures”, while the Income is regarded as
“Revenue Income”.

Revenue Profit = Revenue Income – Revenue Expenses

Revenue Expenses
The revenue expenses are similar to expenses in phase 1, excluding Pre-delivery and Acquisition costs. The expenses are mostly on feeds.
Revenue Income
The revenue income will be derived from the sales of eggs.

Revenue Profit/Loss

At the onset of egg-laying, the revenue expenses will be far higher than revenue income. This will create revenue loss.
As production increases, the gap between revenue expenses and revenue income closes and revenue loss decreases.
At about between 28th and 29th week, the revenue income will be equal to revenue expenses.
At this point, the batch is said to reach “break-even point”.
As egg production further increases, the revenue income will be higher than revenue expenses, resulting in
“revenue profit”. This will happen at around 35th to 36th week.
When this happens, the batch is considered to have turned “profitable”.
Once the batch turns profitable, the profit will be applied to gradually write-off the accumulated loss that
occurred between the commencement of egg-laying and when the batch reached ”break-even point”.
As egg production increases furthermore, the revenue profit increases and at a point, the accumulated revenue loss
will be completely written-off.

Subsequent revenue profits will be applied to gradually write-off the capital investment in phase 1.
During this period, the birds would have reached peak production of between 80%-90%.

iii Terminal Phase

As the birds age, the egg production decreases and the revenue starts to decline.
At a point, the income from egg production will not be enough to cover the ongoing expenses. When this happens, the birds will be disposed off as “old layers” and the batch cycle will come to a close.
This happen between 75th and 80th week

The income realized from the sales of the old birds is regarded as “capital income”. It is like selling off old machine.
The capital income is used to write-off the balance on the invested capital, if it has not been completely written off in
egg-laying phase.
The surplus remaining is the profit from the batch.
All drawings, in form of eggs, birds and cash by the owner would be valued and added to income as they take place.

Note: The over-all profit of the batch and attainment of key milestones (age at commencement of egg-laying,
attainment of break-even point, profitability point and terminal stage) will depend on many factors, including:
• Management of the birds at each stage of development, especially Pre-egg Laying Stage
• Breed of the bird
• Quality of feed used
• Weight of birds at point of lay
• Human factors (attendants’ trustworthiness)
.. and other factors peculiar to the farm and batch.

Summary

Profit determination in egg-producing batch can be summarized as follow:

1) Capitalize all expenses prior to commencement of egg-laying
2) At commencement of egg-laying, regard all expenses as revenue expenses and all income as revenue income.
3) Determine revenue Profit/Loss as : Revenue Income-Revenue Expenses
4) There will be accumulated revenue loss up to when batch reached “break-even point”
5) Profit arising after break-even point will be used to write-off accumulated loss in step 4).
6) Subsequent profit will be applied to write-off capitalized profit in step 1.
7) Sell off the birds when revenue income is lower than revenue expenses
The income realized from sales of birds is regarded as capital income.
9) If capital invested has already been written-off in the previous stage, then this final income will be part of
total profit from the batch.

2.2 Profit Determination of Layer Birds Starting with Point Of Lay (POL)

The other approach to raising egg-laying birds is to buy the birds at Point of Lay (POL).
The birds have been raised up to between 14 and 16 weeks by the vendor.
There are both advantages and disadvantages to this approach.

Advantages
1) The farmer can start getting return on his investment within a short period.
2) The risks associated with rearing day old chicks are avoided
3) The farmer can benefit from specialization of POL farmer

Disadvantages
1) It involves high upfront capital outlay -the cost of a bird can vary between N1,200 and N1,400
2) The farmer will rely on the vendor for the history of the birds which in most cases might not be factual
3) The vendor might have skipped some important drugs/medications which might affect the birds’ production performance.

** To be safe, look for reliable and trusted POL Rearing farmer Profit Determination
1) Capitalize the acquisition cost plus additional expenses incurred before commencement of egg-laying.
For example, if cost of acquisition of POL is N6million and additional N1million is spent before the birds start laying eggs, the amount to be capitalized is N7million

2) Follow the steps in phases 2 and 3 in rearing from DOC

3 Rearing of Point of Lay (Pullets)



Some farmers specialize in raising birds from day old chicks (DOC) to Point of Lay and selling to other farmers for further
rearing for egg-production. The batch cycle is between 12 and 16 weeks.

Profit Determination

The process of profit determination is similar to that of rearing for meat.
Income and expenses are regarded as revenue (Revenue Income and Revenue Expenses).

Revenue Profit = Revenue Income- Revenue Expenses

Challenges Faced By Poultry Farmers In Profit Determination

There are 2 major tasks involved in profit determination:
1. Bookkeeping (recording of income and expenses on daily basis)
2. Profit calculation (the arithmetic of addition and subtraction)

The 2 tasks could be cumbersome and time consuming for the farmer, especially if it has to be done manually.
The farmer wants to concentrate on rearing his birds.
This has prevented majority of farmers from venturing into profit determination in spite of its importance to the business.
Unfortunately this has lead to the collapse of many poultry businesses.

Role of Technology

Technology has come to the aid of farmers in simplifying the process of profit determination.
This comes in the form of “Cloud Accounting System”.
Cloud Accounting System can assist farmers in the tasks of bookkeeping and profit calculation in a cost-effective and stress free way.
All the farmer needs to do is to enter the transaction data and the remaining process is automatically carried out.
Cloud Accounting is a computer-based accounting system devoid of the high costs associated with traditional computer-based accounting system:
• No computer software to acquire
• Basic hardware requirement is a laptop and internet connection
• Pay affordable monthly subscription
• Easy to operate
• Carry out transaction entries remotely from the farm
• Works the same way as Internet Banking

For further information on Cloud Accounting System installation and questions on the post, we can be reached on:

Email: betaideas95@gmail.com , Telephone: 0909 8410 126

In the next post, we will discuss how you can improve the profit in your poultry business.

Appendix I

Worked Example

Profit Determination of Meat-Producing batch (Broilers)
The following data is based on average Income and expenses incurred over 3 different batches of 200 birds each.

EXPENSES

---

• Pre-delivery expenses- N1,500
• Drugs/Veterinary expenses N3,500
• Cost of acquisition: 200 DOC @ N230 each + 4 free birds: = N46,000
• Feed: 30 bags of 25kg:

a) 8 bags Broiler Starter @ N3,650 = N29,200
b) 22 bags Broiler Finisher @ N3,550= N78,100

• Heating expenses (wood shaven, kerosene, charcoal, lantern etc)= N2,000
• Other miscellaneous expenses (transportation, etc)= N3,000
• Mortality = 8

TOTAL EXPENSES = N163,300

INCOME
SALES INCOME = 196 birds @ N1,350 per bird = N264,600

PROFIT = N264,600-N163,300 = N101,300

Note:
1) The birds were raised for 42 days with average live weight of 1.9kg per bird.
2) Some of the birds reached live weight of 1.8kg at 35 days and were sold off

Cost Categorization

The costs (expenses) associated with raising birds can be categorized into 2 types:
i[size=8pt]) Variable Costs
Variable expenses are those expenses that increase directly with the number of birds.
Cost of acquisition: the cost of acquiring 400 day old birds is twice the cost of 200 birds.
Cost of feed: the cost of feeding 400 birds is twice the cost of feeding 200 birds

ii) Fixed Costs

Fixed costs remain the same over a number of birds:
Drugs/Veterinary, Cost of attendant, heating expenses, transport etc
These remain the same for 400 birds and 200.
This means that you can increase profit by increasing the number of birds in a batch since fixed costs remain the same.

nice writeup

Pls how can I get good buyers of my broilers, pls I need a contact

Nice