Analysis of business feasibility on rice milling business in Porsea district of Toba Samosir regency

The consistent growth in grain production, particularly rice, in Toba Samosir has led to the emergence of numerous rice milling businesses in the region. This is due to the significant potential for further expansion in grain production in the district, making it an attractive area for such ventures. Nevertheless, the rice milling industry in the Porsea sub-district has various intricate challenges, including funding, technological advancements, marketing strategies, and access to market intelligence. This study aims to ascertain the characteristics of the rice milling industry and determine the firm’s financial viability. The methodology employed in this study involves doing a feasibility analysis utilizing the metrics of Net Present Value, Internal Rate of Return, and Net Benefit Cost Ratio. The objective is determine the viability of rice milling activities in the Porsea sub-district. The findings indicated that the mean annual income of the rice milling industry in Porsea amounted to 147,439,448 IDR. The Porsea rice milling business has met the necessary criteria for consideration, with a Net Present Value (NPV) of IDR 658,682,140, a Net Benefit-to-Cost ratio (Net B/C) of 1.2, and an Internal Rate of Return (IRR) of 46.29%. These figures suggest that most regional rice milling firms are financially feasible.


Introduction
In recent years, the Toba Samosir Regency has witnessed a notable surge in grain production, resulting in an annual yield of 150,000 tons.It is worth noting that the average rice consumption in the Toba Samosir Regency stands at a modest 25,000 tons per year.There exists a substantial disparity between the production and consumption of grain and rice, rendering them potentially valuable as economic commodities for export to other locations within the province of Sumatera Utara.Toba Samosir Regency, situated in northern Sumatra, is recognized as one of the districts engaged in grain and rice production.Despite its relatively limited harvest area, this district stands out for its notable average grain output, surpassing other districts in Sumatera Utara.
Business feasibility studies continue to be a viable method for assessing the viability of a business in contemporary times.Novice entrepreneurs with a restricted understanding of business management often exhibit the audacity to initiate a business venture after they have conducted a comprehensive business feasibility analysis with the aid of professional guidance [1].Several commendable sustainability entrepreneurship concepts and projects often fall short of accomplishing their objectives due to issues about practicality [2].The objective of doing a feasibility analysis is to ascertain the feasibility of a business venture by assessing multiple criteria.[3].Each facet possesses its own set of eligibility criteria.In the event that some aspect is deemed unsuitable, it becomes imperative to offer recommendations for enhancement with the aim of attaining the acceptable level of feasibility.The project's cancellation may ensue if the aforementioned requirements are not fulfilled.Typically, the elements under consideration encompass technological feasibility, market feasibility, managerial feasibility, financial feasibility, legal feasibility, and social feasibility.This study exclusively concentrates on the dimensions of technical feasibility and financial feasibility.According to the [4], The word "feasibility study" is commonly employed in the context of product development processes.Feasibility studies concentrate on five areas: technical, economic, legal, operational, and scheduling feasibility studies.According to [5] feasibility study is the initial consideration that must be done before running a business, this study also forms the basis for business decisions, so that neither any party would be harmed, the feasibility study also consists of several aspect: market, technical, financial, legal and risk identification.
Business feasibility studies are undertaken to ensure that a project does not result in wasted efforts [6].Put otherwise, the implementation of the project is conducted in a manner that minimizes the squandering of time, energy, and mental resources, hence mitigating any future complications.There exist five primary purposes associated with the preparation of a business feasibility study for a project prior to its implementation, these objectives are as follows [7]: 1. Avoid the risk of loss due to a full future of uncertainty 2. Facilitate planning related to the amount of funds needed, when the business or projectis run, where the project site will be built, who will carry it out, how to run it, and howmuch profit will be obtained.

3.
Facilitate the implementation of work because it has been prepared various plans in the implementation of business.4. Facilitate supervision because the implementation of the project is based on the plan that has been made.5. Facilitate control so that if there are irregularities will be easily detected and repaired immediately.
This observation suggests that the production of maize and rice in this particular area is characterized by a consistent and environmentally viable approach.The use of distinct planting and harvest patterns twice a year in this district contributes to its stability and the consistent growth of grain production through time, distinguishing it from other districts.By implementing effective planting and harvest patterns, it is anticipated that there will be a consistent growth in grain production from one year to another.
The village area in Porsea is quite large, meaning that the costs of the milling business may increase.The four aspects of milling are influenced by many variables, including physical, economic, institutional, technological, and sociodemographic considerations.The physical elements encompass the proximity of the mill to significant urban centers and the presence of enough storage capacity at the milling facility.On the other hand, the economic factors involve the milling fee and the extent to which the miller is involved in the cultivation of rice [8].Porsea is recognized as a sub-district housing a prominent rice milling business hub.This area boasts an extensive number of over 20 rice milling enterprises, which are operated through various management structures, including independent ownership, self-help initiatives, and renting arrangements.Furthermore, it should be noted that this particular enterprise operates on a seasonal basis, exclusively during the harvest period.Additionally, it is worth mentioning that there exists a milling business that has been passed down through generations.The establishment of a novel rice milling enterprise, coupled with the escalating output of grains in Toba Samosir Regency, particularly in Porsea District, is undoubtedly a favorable development.The presence of economic advantages is among the considerations that influence the community's decision to establish a rice milling enterprise.In the realm of business theory and analysis, it is widely acknowledged that a business can be deemed commendable and prosperous when it demonstrates longevity and sustainability in its operations.In order to achieve a state of sustainability, it is important to take into account the aspects of financial planning and administration, ensuring that they are meticulously assessed.This will enable the firm to be classified as a viable and worthwhile endeavor.Based on the aforementioned description, the feasibility analysis is conducted with the objective of mitigating risk for small business operators engaged in rice milling.
There are several factors that need to be assessed in compiling a business feasibility study is related to several aspects, among others.

Market and Marketing Aspects
According to [9], the market and marketing aspect aims to find out how big the market will enter, the structure and opportunities of the The text discusses the current market, future market potential, and the appropriate implementation of marketing tactics.The market and marketing encompass various elements, including market opportunities, future product demand trends, challenges posed by competitors, and implemented marketing techniques.

Technical and Production Aspects
The technical aspect refers to physically developing a firm and its operation once the physical building is finished [9].Technical discussions encompass identifying project sites, procuring raw materials for production, and the choice of machinery and technology to facilitate the production process.

Organizational and Management Aspect
This aspect includes management in project development and management in operations.
Management in project development reviews the physical construction of projects, while management in operations includes the procurement of human resources, the amount of manpower and the qualifications necessary to manage and operate a project.Aspects of management and organization are used to examine the readiness of human resources who will run the business, then look for forms of organizational structure that are in accordance with the business that will be carried out [9].

Financial Aspects
Financial analysis involves evaluating and calculating the value of rupiah units for significant factors in the decision-making process during the business analysis phase [10].The discussion in this financial aspect revolves around acquiring and allocating funds, managing working capital, generating income, handling business expenses, and analyzing cash flow.This analysis primarily involves assessing the financial strength of the business through indicators such as net present value, internal rate of return, and net benefit cost ratio.This assessment aims to establish the firm's sustainability, allowing operators to judge its practicality.Thus, if the idea of a business/ project that has been declared economically feasible, in implementation rarely fails unless caused by uncontrollable factors such as flood, burning, and other natural disasters that are beyond human reach.A feasibility study employing metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), and Benefit Cost Ratio (BCR) is utilized to ascertain the viability of a company venture.BCR is the comparison of present value with a specific discount factor with revenue flow with project financing flows.If the benefit-to-cost ratio exceeds one, the project is deemed worthwhile for implementation.Conversely, if the B/R ratio is less than one then the project is not worth implementing.One essential component in evaluating the viability of an investment proposal is conducting a financial feasibility study [11].

Methods
The study was undertaken for one year, with the selection of a research site in Porsea Subdistrict, Toba Samosir Regency.Porsea District, located in Toba Samosir Regency, is characterized by a significant concentration of rice milling enterprises and many landowners engaged in rice cultivation.This study employs a descriptive quantitative approach using primary and secondary data sources.Primary data is acquired via the process of direct observation and the use of questionnaires.Secondary data is acquired from affiliated agencies.The data analysis methodology used in this research encompasses two distinct approaches: descriptive analysis, which offers a comprehensive picture of the micro-business rice milling phenomena and its profile in the Porsea Subdistrict, and financial analysis.
1. Descriptive analysis (Profile of rice milling small business sector) Descriptive analysis is a useful analysis to describe the variables studied [12].This research serves as a tool to ascertain and elucidate the overall outlook and state of business viability and the methods for developing a rice milling company in the Porsea District of Toba Samosir Regency.2. NPV, IRR, BCR (How to analyze the financial viability of rice milling businesses).In this study the authors used analysis, namely: a.Net Present Value (NPV) is an investment criterion that is widely used in measuring whether a project is feasible or not.= Internal rate (interest rate) for the 2nd determination NPV1 = net present value of ir results NPV2 = net present value of IR results c. Benefit Cost Ratio is a comparison between net benefits that have been discounted positively (+) with net benefits that have been discounted negative (-), with the following formula: If the net value of the benefit-cost ratio (B/C) exceeds 1, the project's business concept is viable, whereas a number below 1 suggests that the project is not worth pursuing.When the Net B/C ratio equals 1, the cash inflows equal the cash outflows.This point, known as the Break Even Point (BEP), occurs when the entire cost equals the total income in present value.

Results and discussions
The area of rice fields and rice productivity in Porsea District in 2019 did not change still by 1,404 hectares.Average production of 6.75 tons/ha.While the area of corn land harvest slightly increased by 14.38%, as well as production increased by 16.48%This increase was due to the right rainy season so as to increase soil fertility.The largest corn field is in the village of Amborgang followed by Nalela, also spread throughout the village/village except in Kel.Porsea Market, Patane II and Patane V. Porsea District has a rice field area of 1,404 ha consisting of 779 ha of half-technical irrigation, 218 simple irrigation, 75 ha of non PU irrigation and 332 ha of rain.The rice harvest area during 2019 reached 1,404 ha via the creation of 9,479.8tons or an average production of 6.75 tons/ha.Patane IV village is a village with the largest rice crop harvest area of 192 ha.

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The area of palawija plant is about 212 ha, corn is the most extensive crop of existing crops,which is 163 ha with a production of 1,857 tons followed by yam plants with a planting area of about 43.3 ha with a production of about 824.28 tons.The largest corn field is in Amborgang Village covering an area of 70 ha followed by Nalela Village 50 ha.This corn crop is also spread throughout the village / village except in Porsea Market Village.In addition to rice plants and palawija.Many people also grow vegetable crops.For example, Mustard.Water spinach.Spinach.Green beans.Cucumber.Red Pepper.Cayenne pepper is followed by the onion plant.

Rice milling overview in Porsea District
Currently it is not known exactly how many rice mills are in porsea sub-district because there are several rice milling businesses that are seasonal, and there are open-close ones where they will only open a milling business when there is an order, or when the harvest season arrivesonly.Based on direct observations conducted by researchers, the following data on rice milling businesses that have been managed professionally and conduct regular operations in Porsea sub-district.In Porsea, the rice milling industry continues to adhere to traditional practices, wherein the owner assumes the role of operations manager.There exist anxieties regarding the delegation of managerial responsibility to individuals due to the budgetary constraints experienced by entrepreneurs [13].
The rice milling industry in Porsea is primarily led by entrepreneurs with primary and secondary education backgrounds, however they showed considerable strength in terms of their capital structure.Out of the total of 12 samples, just two individuals initiated a rice milling enterprise by getting a loan from a bank.In addition to this, the average duration of business enterprises reveals considerable variation, but a majority have demonstrated a longevity beyond seven years.The analysis suggests that the rice milling industry holds promising prospects for aspiring entrepreneurs in terms of financial gains.

Rice milling activities.
Rice milling business in Porsea Subdistrict still relies on the agricultural products of the surrounding community as a source of grain raw materials to be processed.Each sub district and village had a different harvest time so it is almost said every day that the roving rice mill continues to operate.The average rice milling business in Porsea uses RMU (Rice Milling Unit) for milling operations.RMU is a type of new generation rice milling machine that is compact and easy to operate, where the process of processing into rice can be done in one process (onepass process).
The average RMU has a small milling cotton, which is between 0.2 to 1.0 tons /hour.This machine when viewed physically resembles a single engine with many functions, but actually 70 consists of several engines that are united in a compact design and work in harmony with single propulsion.In this study, the average machine used by the owner of a traveling rice milling business in Porsea Subdistrict is a Kubota brand made in Indonesia, this drive machine has a maximum power of 60-80 PK.Furthermore, the Chinese-made Chang FaHwang brand is CFZS 1115G with 40 PK or 4000 RPM power.

Financial analysis/business expenses 3.2.1. Fixed costs and variable costs.
Business costs refer to the expenses borne by rice milling business proprietors in Porsea to fund different production elements in company operations, including both fixed costs and variable costs.Fixed costs are costs that must be incurred by business owners whose magnitude is not affected by the production produced.Components in fixed costs incurred by the owner of a rice milling business in porsea include the depreciation cost of the tools and tax costs.The equipment used in the rice milling production process at the research site is in the form of milling machines, pick up cars, sack tailors, tarpaulins, basins, carts, scales, fans and rice sying.In general, the chart below provides a comprehensive breakdown of the overall expenses of establishing a rice milling enterprise in Porsea.The rice mills in Porsea generate receipts from the sale of primary products and byproducts as part of their commercial operations.The primary agricultural output is rice, and the expenses incurred for milling services are compensated by utilizing rice at a ratio of 10:1.This implies that for every 10 kilograms of rice produced, one kilogram of rice is allocated as payment for the milling services.Additionally, the by-products generated consist of bran or bran along with menir/jintai.

Business feasibility analysis
The business feasibility of establishing a rice milling enterprise in Porsea is determined by evaluating the level of acceptance in relation to the associated costs.In response to objective 2, this study aims to assess the viability and profitability of the rice milling industry in Porsea.To achieve this, an investment feasibility analysis with a criterion of 81 will be employed to determine the potential outcomes, including profits, losses, or break-even points.There are three commonly used financial evaluation metrics in investment analysis: (1)  The Benefit Cost Ratio (BCR) is a metric used to evaluate the financial viability of a project by comparing the present value of revenue flows with project finance flows, taking into account a specific discount factor.If the benefit-to-cost ratio exceeds one, it indicates that the project is deemed economically viable and justifies its implementation.On the contrary, in the event that the benefit-tocost ratio (B/R ratio) is below one, it can be concluded that the project lacks viability and should not be pursued.The Internal Rate of Return (IRR) is considered a reliable indicator of project viability when its value is equal to or above the interest rate.On the contrary, if the internal rate of return (IRR) is lower than or equal to the interest rate, it indicates that the project lacks viability and should not be pursued.The finance theory posits that the net present value (NPV) is considered to be technically superior than the internal rate of return (IRR) [14].4 shows the results of calculations where the NPV value of porsea rice milling business amounted to 658,682,140 IDR, which shows that the net benefits or profits obtained from 8 years of traveling rice milling with a discount rate of 15 percent amounted to 658,682,140 IDR.The value is greater than zero or positive value so based on NPV criteria, rice milling efforts are worth running.Meanwhile, the net value of B / C produced is 1.2 shows that every one unit of cost incurred for rice milling business provides a profit of 1.2 units.Based onthe criteria of investment assessment if Net B/C is more than one then the business is worth running.Meanwhile, the IRR value of the mobile rice milling business in Porsea amounted to 46.29 percent.This shows that the return on investment invested in porsea rice milling business is 46.29 percent.The value is greater than the discount rate of 82 determined at 15 percent.So based on the criteria of investment assessors for IRR, the roving rice milling business in Porseato run up to the IRR level of 46.29 percent.

Conclusions
Based on the findings derived from the conducted research on the Feasibility Analysis of The Moving Rice Milling Business in Porsea, it was determined that the annual average income generated by the rice milling business in Porsea amounts to 147,439,448 IDR.The Porsea rice milling firm has met the criteria for consideration, as evidenced by its net present value (NPV) of 658,682,140 IDR, a net benefit-cost ratio (B/C) of 1.2, and an internal rate of return (IRR) of 46.29%.The establishment of a mobile rice milling business has the potential to serve as a sustainable source of income for some communities.
Consequently, it is anticipated that communities engaged in this economic endeavor would be able to foster the growth of a mobile rice milling enterpise, thereby creating employment opportunities for community members.The present study is subject to certain limitations, primarily concerning the selection of research respondents.Specifically, the rice milling business actors included in the study cash flow (Proceeds) in year 1 i = Discount rate n = Length of time or period of investment IO = Initial Outlays b.Internal Rate of Return (IRR) is a discount rate that makes the same between the present value of cash receipts and the present value of the value or investment discount rate/discount rate that shows the net present value or as large as zero. of return to be sought IR1 = Internal rate (interest rate) for the 1st determination ir2

Table 1 .
Fixed costs and variable costs of rice milling business in Porsea.

Table 2 .
Total cost per rice milling business in Porsea.

Table 3 .
Average revenue per year per Porsea rice milling business.Rice milling business income in Porsea.Income is a profit obtained by reducing the total revenue with total costs, porsea ricemilling business income is quite varied, because the location of raw materials of each mill is different and affects the amount of income of each milling business because each village has adifferent harvest time.To see the amount of income of the traveling rice milling business Visible in the Table provided.

Table 4 .
Average income per year per Porsea rice milling business.
Net Present Value (NPV), (2) Benefit Cost Ratio (B/C Ratio), and (3) Internal Rate of Return (IRR).The Net Present Value (NPV) of a project refers to the Present Value of the disparity between the benefits and costs, considering a specific discount rate.The Net Present Value (NPV) metric quantifies the surplus profit in relation to the expense incurred.If the benefits' current value is above the expenses' current value, it signifies that the project is feasible or financially beneficial.Stated differently, a positive net present value (NPV) indicates that the project is financially advantageous.On the contrary, if the net present value (NPV) is less than zero, it indicates that the project lacks sufficient value to warrant further pursuit.

Table 6 .
Calculation Analysis of NPV, Net B/C Ratio, IRR Porsea Rice Milling Business.