Business Plan

Every Business Has Essentially Three Tasks

Production

Marketing

Financing

Business Plan Describes How These Function

And Convinces Bank to Give You a Loan

Components of a Business Plan

Description of Proposed Site & Production System

Marketing Plan

Financial Analysis Annual Costs & Returns

Required Financing

Farm Appraisal

Balance Sheet

Income Statement

Cash Flow Budget

Personal Financial Statement

Brief Resume of Borrower

Critical Question I

What Species Will You Produce?

Do You Have a Clear Understanding

of the Species?

Do You Have In Depth Knowledge

Including Constraints & Benefits?

These Must be Reviewed – Both

Biologically & Economically

Example: Tilapia

Biological & Economic Constraints

Tropical Fish That Can Die in Winter in

Much of the US

Must Over-Winter Indoors – Raising Costs

Good Fillet Market in US. But Imported

Fillets Cost Less (Visibly Lower Quality)

Live Sales are Difficult, with Limited Market

Example: Baitfish

Biological and Economical Constraints

Low Production Costs & Low Yields

Live Product Requiring Extensive

Distribution System

Local Sales Tied to Local Fishing Conditions

These are Nationwide on Holidays

Market for Baitfish is Flat – Little Opportunity

for Growth

Baitfish II

Biological and Economical Constraints

Difficult Both to Wholesale or Break

into Market

Could Sell Baitfish Retail but Volume

Will be Low

Even in Prime Fishing Areas, Profits

from Baitfish Sales Are Low

Possible to Sell to Established Baitfish

Wholesaler with Established

Distribution Network

Example: Freshwater Prawns

Biological and Economical Constraints

These Are Tropical Animals Sensitive

to Temperature Shifts

Total Production Will Need to be Sold

Together Before Prawns Die Due to

Seasonal Low Temperatures

Therefore Market will be Skewed &

Prawns Sold When Price Lowest

Insecticides Will Also Kill Prawns

Freshwater Prawns II

Biological and Economical Constraints

Markets Not Mature – New Grower

Must Help Develop Market

Production Risks are High - Severe

Losses are Possible

Seed Supply Unreliable and Scarce

Production Costs Not Well Known

Harvesting Requires Draining Ponds

These – May Need Retrofitting

.

What About

Eels Turtles

Bullfrogs Alligators

Eels Turtles Bullfrogs Alligators

Biologically Possible but Questionable

Economically

Specialized Industries That Might be

Profitable Only Regionally

If Something is Not Being Raised

Likely to be a Reason

Critical Question II

Are You Fully Aware of the Risks Involved?

Low Dissolved Oxygen

Viral, Bacterial & Protist Diseases

Effects of Bird Depredation

Remediating Off Flavors

Market fluctuations

Remember Fish Farmers Bear All Risk

There are No Gov’t Programs to Help

Critical Question III

Have You Studied Economics of Production

For the Species You Have Chosen?

What Will it Cost to Produce This Species

In Your Production System?

Have You Factored in Cost Estimates

For Disease & Bad Weather?

Bottom Line

Can You Raise This Species and Sell

It for a Profit?

Tilapia Production Costs

Production Costs $/lb

Tropical Ponds 0.74

Tropical Raceways 0.75

Subtropical Greenhouse 1.12

Pond Culture US 1.03

Temperate Indoor Tanks 1.62

Critical Question IV

Aquaculture is Management Intensive

You Must Ask Yourself Whether You Have

The Skills, Management Ability & Time

to Run a Fish Farm

If Not, You Have to Hire a Manager

Critical Question V

It is Critical to Spent Time Studying the Markets

Are the Markets Accessible?

What Have Market Prices Been

Over the Past 5 Years?

Are Prices Higher During Certain

Times Rather than Others?

Is the Common Market Price High

Enough to Cover Your Costs?

The Business Plan

Organized and Structured Document That…

Analyzes the Market Potential

Explains the Production Technologies

Estimates the Financial Performance

The Document is Necessary to…

Evaluate Feasibility

Estimate Investment & Operating Capital

Secure Adequate Financing

Why is the Business Plan Important?

Many Prospective & Existing Small Business

Owners Have Difficulty Obtaining Financing

Lenders May Not be Familiar with Your Small

Business (eg. Aquaculture)

Adequate Business Planning May Help Avoid

Mistakes

Proper Planning Can Also Minimize Risks

With the Market, Production & Financing

The Fundamental Questions

Addressed in a Business Plan

How Will You Produce the Product?

Description of Production System

Who Will Buy the Product?

Marketing Plan

Is the Business Financially Feasible?

Economic and Financial Analysis

Description of Production System

Thorough Description of The Production System

Citing Locations of Similar Existing Systems

Analysis of Potential Production Problems With

Documentation from Other Producers

These Show the Lender Your Awareness of

Production Problems and How to Remediate

Marketing Plan

Successful Aquaculture Businesses

Are Market-Oriented

Have Diverse Markets

Are Committed to Their Customers

Decisions on Species, Harvest Size, and

Volume – Based on Market Analysis

Profits Are Made By Selling Fish

Not Producing Them

How to Begin to Analyze the Market

Even If You Intend to Strictly Sell

to a Processor…

Talk to Retail Operations That Sell Fish

It is Important to Understand the Product

Qualities & Characteristics Expected

by Retail Sellers and Their Customers

Begin to Analyze Market

Talk to Many Buyers to Learn Their Different Wants

Retail Markets

Processors

Wholesalers

Distributors, Brokers

Restaurants

Seafood Stores

Supermarkets

Consumers Buying Directly

Understand Customer’s Expectations in Quality

Value and Safety

Analyze the Market

Each Buyer Has Its Own Buying Patterns

Historical Prices Paid

Product Forms

Dockage Fees

Transportation Charges

Payment Expectations – 2% 10, Net 30

Seasonality Issues

Delivery Volume Requirements

Quality Standards

Procedures

Contracts

Enough Potential Buyers to Support the Business?

Marketing Plan

Documentation from End Users of Your Product

Stating That They Will Purchase Your Fish

Provided They Meet Quality Standards

This Will Strengthen Your Loan Proposal

Financial Analysis Includes

1. Estimated Annual Costs & Returns

2. Estimate of Required Financing

3. Physical Plant Appraisal

4. Balance Sheet

5. Income Statement

6. Cash Flow Budget

7. Personal Financial Statement

Enterprise Budget Includes:

Estimate of The Annual Costs & Revenues for a

Typical Year After the Business is Established

Indicates Generally Whether Proposed Production

System is Profitable

Indicates The General Level of Expected Profit

Indicates The Breakeven Costs

Indicates The Breakeven Yields

Estimate of Required Financing

Aquaculture is Capital Intensive – Some Lenders

Require 50-65% Owner Equity

Investment Cost – Catfish Farm: $4,900-$5,500/Acre

Land 23-26%

Pond Construction 33-35%

Water Supply 11-14%

Equipment – Feed Bins 28-30%

If you Already Own the Land the Investment\

is $3,600-$4,200/Acre

Balance Sheet

Lists What Assets and Liabilities Would be for

The New Aquaculture Business

Used to Calculate Net Worth (Owner Equity)

Used to Determine Solvency & Liquidity

Financial Strength & Position of the Business

Texas Lenders Prefer Owner Equity of 60-65%

for Aquaculture Loans

Income Statement

Itemizes Farm Income and Expenses

Also Called Profit and Loss Statement

Calculates:

Net Farm Income

Return to Capital

Return to Labor & Management

Return to Equity

Cash Flow Budget

What Is It? It‘s a Summary of Cash Inflows & Outflows

Over a Given Period of Time

It’s an Important Forward Planning Tool

What Is Its Purpose? Estimate Future Borrowing Needs

Estimates the Loan Repayment Capacity

Schedule Payments and Harvests

Cash Flow Budget

Shows Cash Receipts & Expenses by Month

Quarter or Year

Includes Only Cash Expenses

Indicates When Cash Available for Loan Payment

Indicates When Cash Needed to Preserve Business

Includes Family Living Expenses

The Business Needs to Generate Cash to Pay

Expenses

Cash Flow Budget III

Indicates When Business Needs More Cash

Can be Used to Plan Operating Lines of Credit

Can be Used to Schedule Purchases of New

Equipment or Major Repairs

Can be Used to Plan Stocking & Harvesting

Schedules to Meet Financial Obligations

Components of a Business Plan

Business Concept – Justification of What you Want to Do

Management Capabilities – Your Management Credentials

Corporate Structure – Sole Proprietor, LLC, etc.

Operations/Production – Technologies You Will Employ

Competitive Analysis – Competition & Why You’re Better

Marketing Plan – How to Place your Product in Market

Financial Analysis – What it Costs & Projected Returns

Capitalization – Who Pays What & How Much to Borrow

Borrower’s Resume – Documenting Relevant Experience