SHELLFISH AQUACULTURE FEASIBILITY STUDY

Expanding Shellfish Culture in the NRAC Region – Constraints to existing industry expansion and an analysis of the economic feasibility of new,

small-scale oyster culture businesses

Part II: The feasibility of new, small-scale oyster culture businesses.

Edwin RhodesAquatecnics LLC, 49 Reed Street, Milford, CT 06460

Rob Garrison,Nantucket Aquaculture, 11 Union Street, Nantucket, MA 02554

Dana MorseMaine Sea Grant College Program, UMaine Cooperative Extension, Darling

Marine Center, 193 Clark's Cove Road, Walpole, ME 04573

Tessa Getchis Connecticut Sea Grant, 1080 Shennecossett Road, Groton, CT 06340-6048

Sandra MacfarlaneCoastal Resource Specialists, Box 1164, Orleans, MA 02653

Expanding Shellfish Culture in the NRAC Region – Constraints to existing industry expansion and an analysis of the economic feasibility of new, small-scale oyster culture businesses.

Part II: The feasibility of new, small-scale oyster culture businesses.

IntroductionIn 2004 the NRAC funded a number of proposals to develop model business plans for start-up companies in selected aquaculture businesses. These model plans are part of an NRAC strategy to reach its goal of doubling northeast aquaculture production within a decade. We have focused our efforts on evaluating several opportunities for shellfish aquaculture in the Northeast region, and present here business plans that can be used as models for start-up oyster aquaculture companies.

Why Aquaculture in the Northeast and Why Oysters?In the northeast region, shellfish aquaculture annual ex-farm value is currently about 50 million dollars from more than 350 separate culture operations and employs approximately 500 people. Only salmon farming in Maine contributes more to the value of aquaculture in the northeast. Although there is a fair amount of shellfish aquaculture underway in the NRAC region, we believe that there are still opportunities to increase production and sales.

Shellfish aquaculture is an old industry in the northeast U.S. and techniques to enhance survival and growth of oysters go back about 200 years. “Modern” shellfish aquaculture that uses shellfish seed produced in a hatchery and employs very intensive culture techniques can mark its beginnings with the first successful production of seed from hatcheries in the 1960’s.

The Northeast U.S., in particular, has been noted for its productive shellfish growing areas, of which thousands of individuals have taken advantage. The industry is based principally on hard clams (Mercenaria mercenaria), Eastern oysters (Crassostrea virginica), and blue mussels (Mytilus edulis), and to a lesser degree, European flat oysters or “Belon” (Ostrea edulis), soft-shell clams (Mya arenaria), and bay scallops (Argopecten irradians irradians).

Shellfish propagation methods range from wild seed collection to land-based hatchery systems, while nursery and grow-out technology includes bottom culture (open bottom, netted bottom, cages), midwater culture (longlines, pearl and lantern nets), and surface culture (floating trays, bags, upwellers, rafts, etc.) (Leavitt, 2003).

Compared to most other forms of aquaculture in the U.S., shellfish aquaculture is a more mature industry with a longer documented history (Barber, 1836; Brooks, 1891; Kellogg, 1910; Kochiss, 1974; MacKenzie et al., 2002a,b; Matthiessen, 2001; Carriker, 2004). As far back as 1959 Loosanoff was talking about new business formation when he wrote and widely distributed an article entitled “You, too, can now hatch clams.” (Loosanoff, 1959).

Since Loosanoff’s early aquaculture publications (Loosanoff 1937; 1954; 1963), a number of other authors have written manuals on how to cultivate oysters, including Burrell (1989), Creswell et al. (1990), Korringa (1976), Matthiessen (1973, 1989) and Shaw (1962). These have been considered in our development of the model oyster production systems described here, but we relied most heavily on the experience in our team that included individuals with hands-on experience in starting shellfish businesses.

The profitability of our model oyster businesses will depend heavily on obtaining a premium price for the product. The willingness of consumers to pay more for quality product has been recently noted in work by Hanson et al (2003). They surveyed U.S. residents in 2000-2001 and found that consumers were willing to pay 34 cents per oyster above the usual raw bar price for a guaranteed safe product. In the same study, 38% of oyster consumers identified price as a constraint to consuming more oysters, but 49% indicated that they would consume more oysters if they were safer to eat and if more fresh oysters were available. Bishop (2003) estimates that in the next decade shellfish sales in the U.S. and Canada could increase by 40%, but notes that this increase will depend on producing “a safe, quality, branded product”.

Some recent work on the logistics and economics of shellfish business start-ups has been done. Adams et al (2001) produced cash flows and enterprise budgets for a small business producing and marketing southern bay scallops and suggest that bay scallop culture is marginally profitable at a small-scale. On Martha’s Vineyard, Karney and Blake (1999), described start up businesses for oysters that grew a high quality product, and received a premium price. Rice and Ganz (1994) have described the basic steps for starting an aquaculture business.

We chose to focus on the oyster aquaculture business opportunities after considering the whole suite of native shellfish that are in culture in the northeast region and the market conditions and state of the technology for each. However, our decision to concentrate on an oyster business is based on information current in early 2005, and may very well change. A prudent potential investor in shellfish aquaculture should make an effort to insure that the oyster business is the right one for them.

In our opinion, the best opportunity for a successful shellfish aquaculture business is with the native oyster, Crassostrea virginica. Hard clams (Mercenaria mercenaria) are also widely cultured, but the market price of hard clams is currently very close to the price of production due to a robust supply from aquaculture companies from Massachusetts to Florida. Blue mussels (Mytilus edulis) are less widely cultured and in Maine, the center of the U.S. production, the industry is moving from on-bottom culture to suspension techniques, making an economic analysis difficult. Additionally, there has been some recent success with culturing mussels offshore in New Hampshire. (Langan, 2001) and investors considering business opportunities in the shellfish arena should consider mussel aquaculture. Bay scallops have been successfully cultured, but in the Northeast growth to produce a market product of sufficient size takes more than one season, and overwintering success has been variable. Sea scallops have also been cultured, but hatchery production of seed is not very reliable, and grow out time is long making this

species currently unattractive as an investment. Work with the soft-shell clam, Mya arenaria, is underway but we know of no successful commercial operations.

The authors believe that there are realistic opportunities for new aquaculture companies for oysters, recognizing an unmet demand for superior quality oysters for the white-tablecloth restaurants and other upscale institutions. Oysters for this market are often referred to as “boutique oysters”. Oysters in this category are grown using methods that guarantee a large percentage of market-sized oysters with a good shape and good quality shells that make the oysters easier to open. Additionally, boutique oysters are name-branded to add marketing appeal, and they are grown in specific geographic locations that impart a distinctive flavor to the oysters and insure that they are safe to eat as a raw product.

The Business Plans - GeneralWe have developed two principal business plans, one for a small company with a target production of 100,000 marketable oysters per year, and one for a medium-sized company that would market 1 million oysters per year. We have presented a highly detailed plan for the larger company which we call the Acme Oyster Company, and some additional information for the small company we call My Oyster Farm. The business plan scenarios for the Acme Oyster Company creates a fictional oyster company in a fictional locations in language and detail that we believe will facilitate the writing of an actual business plan.

We forecast that the company with a target production and sales of 100,000 oysters per year can operate with one or two people, and can be done on a part-time basis, at least until it reaches its operating capacity. The oyster business with target sales of 1 million oysters per year will require a company with 5 or 6 full-time employees.

We hypothesize that both of our model companies will buy seed oysters from existing hatcheries, will operate seed nurseries to produce planting-sized oysters, and will use grow-out culture methods that have proven track records in the northeast. Persons entering the oyster businesses with little or no experience in this industry are urged to start initial production at about 10% of the final target production, and build the company to its final size over a three or four year period. This will allow the start-up company to gain the maximum amount of experience with the minimum risk, and also allow for a gradual increase in the supply of market-sized oysters that makes marketing more rational.

The oyster company models include descriptions of costs and timing for site selection, permitting, site leasing, nursery construction and operation, seed purchase, grow-out gear selection, grow-out operations, oyster cleaning and grading, labor, insurance and financing. Our team members obtained materials cost information from open market commercial sources and from personal knowledge of construction and maintenance cost for gear. Estimates of labor use and costs came from the team’s personal experience and from conversations with commercial growers. We also obtained some additional

information from our survey of commercial companies that we did as part of another NRAC-funded study (MacFarlane et al., in press).

For both of our model companies, it is expected that the product will be sold directly to up-scale restaurants. Our experience with oyster marketing indicates that direct-sales to white-tablecloth restaurants is the best starting point. Our experience also has shown that it is nearly impossible to obtain contracts or other “bankable” assurances of future product sales. The market price information in this report came from personal experience by team members, and from some additional conversations with restaurant owners and seafood purchasers.

Finally, the success of an oyster aquaculture start-up company will depend on four major factors. These are location, methods, capital and marketing. There is more detail on these critical factors later in this report, but their importance cannot be overemphasized. The vision we have in these plans is for companies that efficiently grow a high quality, brand-labeled oyster, grown in a location that will guarantee that it is safe to eat and marketed directly to white tablecloth restaurants and other high-end retailers.

The Oyster Aquaculture Company Business Plans

Acme Oyster CompanyBusiness Plan

(1 million market oysters/year)

IntroductionThe Acme Oyster Company will be formed to produce one million high quality oysters per year. Located on 10 acres of leased water adjacent to the pristine Hollywood Beach, Acme will use a floating bag system to provide white tablecloth restaurants with half shell oysters.

ObjectivesObjective 1. Plant 1.5 million oyster seed per year Objective 2. Begin market sales in year 3 Objective 3. Minimum sales price of 55 cents per oyster, average sale price 65 cents

Keys to SuccessProduction System that reduces labor, provides optimum growing conditions, and ensures a high quality product. Sales and marketing service that provides the customer with a consistent high quality product, professional packaging and on time delivery. Management that ensures a well organized, efficient operation, motivated employees and financial responsibility.

MissionAcme Oyster offers high quality, half-shell oysters to high end restaurants year round. Frequent testing insures that our product meets the highest standards of health certification. Acme will provide customers with a consistent quality product harvested

and shipped within 24 hours of ordering. Initial market focus will be high end restaurants and wholesalers along the East Coast. As production increases major cities throughout the U.S will be targeted and export opportunities will be investigated. Acme will provide employees a living wage with benefits and ensure a healthy, safe working environment. Every effort will be made to produce oysters in an eco-friendly manner using accepted best management practices.

Facilities/EquipmentRequirements: Gear Preparation and Storage, Staging Area – Minimum 1000 sq.ft of indoor space required for gear preparation/assembly, workshop, and tool storage. Minimum 1500 sq.ft. outdoor space required for storage of gear, construction projects, boat maintenance, etc. Wholesale Dealer permitted packing/storage facility – Indoor space with walk-in refrigerator conforming to State Department of Public Health requirements to be used to pack oysters and store before shipment.

Boats (with location to load/unload) – One boat should be large enough to handle 20,000 oysters (approximately 1.5 tons) as well as transport culture gear equal to 100 oyster bags. The second boat can be smaller and used mostly for transporting personnel. A convenient place near the operation’s staging area and packing facility should be secured for loading and unloading the boat(s). Ideally, this will be a permanent dock where the boat is routinely tied up.

Truck – Depending upon the shipping arrangement, a refrigerated truck able to carry 20,000 oysters (approximately 1.5 tons) may be needed to deliver the boxed oysters to customers or a commercial carrier. In addition, a standard pickup truck is also required for general purposes.

Work Barge/Rafts – Unless the farm site is located adjacent to controlled dock space or land, a floating work barge or raft is required for operations including; grading, counting, stocking, harvesting and cleaning. At a minimum a 50 ft X 20 ft platform is necessary and, depending upon the size of cleaning or grading machinery (if operated on site) further area may be required.

Nursery Upwellers (tidal/land-based) – Tidal upwellers are the most economical and efficient nursery systems , but require at least 2 knots of current. FLUPSYs are also very efficient, but require protected waters with access to electricity. Land based, pump operated upwellers require the most labor and are the most expensive to operate. One 8 ft. X 20 ft. tidal upweller or FLUPSY can grow approximately 100,000 oyster seed to one inch. Land based upweller performance is based on water flow and productivity.

Equipment – Major Equipment includes a mechanical grader, pressure washer, and hydraulic hauler (for cage culture system). Labor costs and other variables will determine the sophistication of the oyster grader, which can be purchased to grade through various sized mesh or using image analysis can sort oysters within 1 mm. A normal range of carpentry and mechanic tools will be required for construction and maintenance.

PermittingPermitting will vary depending upon location. Contact your Town government to learn about local regulations. Local extension agents and State government agencies can provide information on State regulations. The Army Corp of Engineers will also require a permit application.

Site SelectionGeneral requirements/considerations for a good oyster growing site

- Temperature- Reasonable flow- Medium to harder bottom, not muddy, not rocky- Predators- Security: is it so remote that watching over it will be difficult- Navigation: does it impede navigational use- Competing use such as fishing, recreation, navigation, etc.- Ice scour, is it deep enough to withstand the ice cover?- Access: can I get to it easily, and can I unload product close by?

If possible, several sites should be compared for growth, fouling, weather exposure, biofouling, etc. before deciding upon the final site. It is also recommended that several growout systems are compared during the preliminary trial period.

OperationsNursery – 1.5 million 1 mm oyster seed are purchased from a commercial hatchery to coincide with the beginning of the growing season, i.e. water temperature of approximately 11° C. Seed are introduced into nursery system(s) and cleaned and graded weekly. (Land based upwellers require daily cleaning). Mesh bins are cleaned with a pressure washer. Oysters are rinsed with freshwater if available. As oysters grow density is maintained to ensure maximum growth evidenced by a doubling in volume of the oysters each week. As the oysters reach one inch in size they are transferred to the growout system.

Growout – One inch oysters are stocked in to ¾” mesh oyster bags at a density of approximately 250 oysters per bag. Bags are maintained through the growing season. With the floating bag and rack and bag system, bags are “flipped” every two weeks to control fouling. Cage culture systems require brine dip or pressure washing, frequency to be determined by local biofouling conditions. Before the end of the first growing season, all oysters should be graded and restocked at either 100-125 oysters (final stocking density) or 250 oysters per bag. In the nursery to bottom system, oysters are distributed on the bottom at the end of the first growing season. Oysters are maintained through the next growing season and may be culled for harvest beginning the end of the second growing season.

Harvest – Except for the first year of harvest (when only about 20% of the oysters are ready for harvest), culling of the largest class of oysters should yield approximately 40%

marketable oysters per bag. It is important to maintain records indicating which bags contain the largest oysters and when they were last graded in order to maximize harvest efficiency. It may be advantageous to maintain four weeks supply of market oysters ready to pack in order to maintain sales during inclement weather or other operational difficulties. Bottom grown oysters are harvested either from a boat using a drag or dredge or with a rake in shallow water.

Packing – Oysters should be brought to the packing facility near the date of shipment. Standard packaging for the East Coast U.S. is 100 count waxed boxes. HACCP regulations must be followed during packing and storage of oysters before shipment.

Sales & Marketing – Sales should be arranged to provide the local market first and, as production increases, expand to regional and national markets. It is extremely important to match projected harvest with sales volume. Promising more than you can deliver can permanently damage your reputation and future sales. Customers appreciate good service. This means delivering the product where and when you promised and being flexible enough to adapt to the customer’s needs. The Marketing Plan below details marketing strategy.

Implementation ScheduleFirst year operations should be limited to less than 100,000 oysters to test different

growout systems and gain specific site knowledge. This will allow the grower to adjust his plan and system to the site. The table below offers a typical implementation schedule.

Activity Yr 1 Qtr 1

Yr 1 Qtr 2

Yr 1 Qtr 3

Yr 1 Qtr 4

Yr 2 Qtr 1

Yr 2 Qtr 2

Yr 2 Qtr 3

Yr 2 Qtr 4

Yr 3 Qtr 1

Yr 3 Qtr 2

Yr 3 Qtr 3

Yr 3 Qtr 4

Yr 4 Qtr 1

Yr 4 Qtr 2

Yr 4 Qtr 3

Yr 4 Qtr 4

Site Selection XPermitting X X X XGear prep X X X X X X XNursery system construction/installation

X X

Seed Purchase X X XGrowout system construction/installation

X X

Wholesale Dealer/Packing Facility Permit

X X X

Sales X X X

Marketing Plan

Sales Goal: 1,000,000 Oysters at an average price of 65 cents.

Target MarketThe market is Domestic and International “white tablecloth restaurants” with appetizer prices of at least $10. This will be accomplished by marketing to wholesalers, and directly to restaurants. Some retail fish markets and individuals will also be targeted.

Local MarketThe local market will be serviced mainly through local wholesalers with some sales occurring directly to restaurants.

RegionalRegional markets include major cities of the East Coast, Midwest, and West Coast.

InternationalDepending upon exchange rate for the dollar an opportunity to export oysters to the EU may exist. As of this writing (2005), initial investigation indicates that export market demand exists at above target price, sufficient to cover the increased shipping costs, and yield a net profit in excess of local and regional markets.

Marketing StrategyWe are placing our oyster at the high end of the market. Besides producing and advertising a high quality oyster “from the clear waters of “Acme Oyster Farm”, we are also emphasizing our oyster as a product that is produced in a sustainable manner using environmentally responsible practices.

This strategy offers differentiation in several areas. First, our area is recognized as a premier tourist location, thus lending credibility to a premium price. Our location is not subject to coastal industrial pollution and runoff and therefore enjoys better water quality than other coastal areas. The Hollywood Beach location reassures the customer that this premium product is healthy, and does not represent a potential source of bacteria related illness.

Our “Brand Name” separates our oyster from the competition and offers customers a unique image for the product. Most oysters are recognized by their geographic location. We are able to capitalize, not only on our location, but also the fact that this is a …….

Finally, consumers have recently begun to pay attention to the origins of, and production methods used, to produce their food. We will work with emerging companies who market products that have been produced responsibly and represent a traditional healthy foods.

CollaborationWe are collaborating with organizations that provide opportunities to implement our strategy. The U.S. State Import Export Association is a non-profit (State) organization that assists companies in exporting their product. This organization also offers businesses the opportunity to participate in Food and Trade Shows overseas, and assists Tribes in marketing their product and making introductions to potential customers. The U.S. State Department of Food and Agriculture provides a free service to businesses wishing to

export that includes a consultation with an expert that assists with the paperwork and regulations involved in exporting.

Negotiations are underway with Famous Wholesale Company to offer our oysters through their distribution network. Acme is also working with Best Mail Order Company, a direct mail organization to provide oysters through their network. Acme has joined the Chef’s Collaborative (www.chefscollaborative.org), which offers us an introduction to top restaurateurs around the country who support sustainable, environmentally responsible foods. Slow Foods (www.slowfood.com) is another organization with access to a unique market of quality food enthusiasts.

Marketing Plan ImplementationTarget customers are identified through several means. Potential customers are identified primarily through the above collaborative organizations, and additionally through restaurant guides, and aquaculture industry contacts.

Our marketing information will be presented mainly through personal contact, supported by a marketing brochure, designed and printed to capitalize on the uniqueness of our product. This brochure will introduce the customer to our product, our production methods, and the distinctiveness of our oyster. This information will be available on our website, where we can respond to prospective customer inquiries. A Data Base of contacts will be developed as part of this marketing effort.

Product will be introduced to qualified prospects through an introductory sales call offering a sample of our oysters. A follow up call after the sample has arrived will initiate detailed information involving price, shipment, and the frequency and size of orders.

Product will also be introduced to potential customers at Trade Shows, Seafood Festivals and special events. Marketing material will be available whenever our oysters are presented to potential customers. In some cases, personal introduction of our oysters to a prospect will be desirable. This method is by far the most effective and will be used when possible.

As the majority of our customers are restaurants, most initial sales efforts will target the Chef or Buyer. Occasionally, the restaurateur may be the preferred first contact. Once a prospect has decided to purchase our oysters, the sale can be made directly to the restaurant, or through a wholesaler the restaurant already uses.

PersonnelThe volume of targeted prospects, and the processing of customer orders will require a dedicated employee. This Sales & Shipping Coordinator will be responsible for implementing our marketing program; expanding sales; coordinating sales orders with production crew; and, coordinating and participating in shellfish packing and shipping operations; generating invoices, tracking sales and monitoring receivables.

Transportation

Our oysters are shipped in waxed cardboard boxes printed with our logo and information via commercial refrigerated truck to the closest major city. There they are delivered to a refrigerated transportation depot where other commercial carriers pick them up for delivery to major markets on the East Coast and in the Midwest. These commercial carriers service wholesalers and a few large seafood restaurants, but offer the lowest transportation cost. As sales expand to the West Coast and other distant metropolitan areas, airfreight will be necessary, requiring ice packs and expensive insulated boxes. Here wholesalers typically pick up the product at the airport, and a few large seafood restaurants may make regular trips to the airport. Direct sales to restaurants must utilize expensive overnight shipping. The higher price realized with a direct sale to a restaurant is often offset by the increased shipping costs usually required with a direct sale, i.e. overnight express in an insulated box with ice packs. But the net price will generally exceed the average.

Competition Over the past five years a large number of East Coast oyster farms have begun producing high quality oysters. Many of these producers are small (annual production around 100,000 oysters), but provide a good product for at least six months of the year. Additionally, Prince Edward Island has improved the quality of their oyster. The Canadians have had a large amount of production at a low price (less than 50 cents U.S. per oyster) for over ten years. However, they have recently improved their quality and now have a large share of the second tier market, restaurants that serve appetizers below $10.

Our strategy to differentiate ourselves from other producers using the premium nature of our product (our location, uniqueness, and sustainable production methods) is important to realize our goals.

Market TrendsThe market for high-end oysters is closely related to the overall health of the economy. When the economy is good, more people frequent expensive restaurants and more oysters are sold. As more people realize the benefits of eating healthy seafood, overall seafood consumption is increasing. This is encouraging, but increased competition must be considered. The effect of increased production of high quality oysters will be to narrow the price range of oysters. Most high quality oysters will be sold at a lower price as restaurants realize that good oysters are available from more and more producers.

Adjusting to Market TrendsThe position of our product in the marketplace will depend on how successfully we are able to promote the, quality, image, and uniqueness of our oysters. In this respect, there will always be premium demand in the marketplace, and this will represent a significant component of our customer base.

While we are not seeking the commodity market for oysters, we recognize the need to respond to pressures to compete at a commodity level. In this respect we will need to

evaluate ways to produce and grow a commodity product capable of being competitive in that market.

PricingOur target price is an average of 65 cents per oyster. The schedule below demonstrates how we can achieve this result. Our premium oyster wholesales for around 67 cents each as compared to the 50-55 cents wholesale price for quality oysters at the Fulton Fish Market in New York. The marketing strategy outlined above is designed to place our oyster at a premium level in order to yield the higher price. The pricing structure will differentiate between wholesalers, restaurants, and direct sales.

Market Segment AnalysisSample target market segments and volumes are shown in the table below:

Market # OystersPrice per

Oyster TotalLocal 100,000 $0.70 $70,000

Wholesale 700,000 $0.62 434,000Air Freight 120,000 $0.76 91,200

Export 80,000 $1.00 80,000

1,000,000 $675,200

Note: Projected Export Sales may be transferred to Air Freight or Wholesale Sales depending upon foreign exchange rates.

Risk AssessmentMajor risk factors include: weather, disease, pollution, management and market competition.

Storm and ice damage can be significant. To minimize risk from storms, nursery and growout sites should offer some protection from high winds. If engineered correctly most growout systems can withstand significant storm effects. It may be difficult to avoid damage from hurricanes. Ice can destroy an entire farm site. Local knowledge regarding icing is mandatory when planning the operation and system.

Diseases prevalent in the northeast are Juvenile Oyster Disease, MSX and Dermo. The first defense against disease is to purchase oyster seed from a reputable hatchery source. Every effort should be made to ensure that only disease free shellfish are introduced into the growing waters. If disease does occur, consult local experts to learn how what steps to take to minimize disease effects.

Pollution can be point or non-point source pollution. Chemicals, petroleum products and illegal discharges are examples of point source pollution. Constant monitoring of the shoreline reduces risk from point pollution. Non-point source pollution can elevate coliform levels causing authorities to designate the farm site as unfit for shellfish harvesting. Elevated coliform levels can be caused by failed septic systems, sewage discharge or, wildlife. Knowledge of the local watershed reduces risks from these risks.

Poor management will lead to lower than estimated survival, growth, and production. A detailed operating plan provides management with a definite schedule for all operating tasks. Following the plan will ensure maximum production, a high quality oyster, and a profitable business. Competition can result in lower than forecast selling price. Knowing the competition and keeping track of the market will allow the business to implement strategies to stay at the top of the market.

Plan EconomicsThe plan costs, revenue, profits, losses and cash flow are found in the following tables. The full 10-year plan economics can be found in the excel spreadsheets in the file called “Acme Oyster Company Worksheets May 2005”under tab “Oyster Farm Worksheet” The assumptions used can also be found in the spreadsheets under tabs for “Assumptions”, “Seed to Market”, “Culture Gear” and “Labor”.

Some of the major assumptions used in these calculations include:1. Oyster seed price from hatcheries at $5.00/thousand2. Annual inflation rate of 3% added to salaries, equipment costs and sales price3. Payroll taxes at 8% of wages4. Employee benefits at 25% of salaries5. Oyster growth produces 20% market-sized oysters at the end of second growing season6. 10% annual mortality rate

The information in the “Oyster Farm Worksheet” is linked to the other worksheets found under the other tabs. That is, changing any of the assumptions or costs on the supporting spreadsheets will automatically be reflected in the main worksheet. This feature can be used to perform sensitivity analyses of the company. For example, changing the sale price for oysters in the sheet under the “Assumptions” tab will show its impact on the bottom line in the main worksheet.

Although the Acme Oyster Company plan is based on using a system of floating bags and long lines, we provide additional cost information for other possible oyster culture methods in the attached excel spreadsheets. Gear costs for cage culture, rack and bag systems, and for direct plants on the bottom can be found in the tab called “Culture Gear”.

Acme Oyster Company Financial TablesYear 1 Year 2 Year 3 Year 4 Year 5 Year 6

Direct Costs

Manager 50,0

00 51,50

0 53,04

5 54,6

36 56,2

75 57,9

64

Asst Manager 35,0

00 36,05

0 37,13

2 38,2

45 39,3

93 40,5

75

Field Workers 20,594

52,103

60,444

67,200

67,200

67,200

Sales/Shipping Coordinator 35,000

36,050

37,132

38,245

Payroll Taxes 8,448

11,172

14,850

15,691

16,000

16,319

Employee Benefits 21,2

50 21,88

8 31,29

4 32,2

33 33,2

00 34,1

96

Contract Services 3,500

3,605

3,713

3,825

3,939

4,057

Seed Costs 7,500

7,725

7,957

8,195

8,441

8,695

Equipment

Boat 12,000

12,000

Truck 5,000

Generator 2,500

2,500

Grader 7,500

Pressure Washer (2) 1,400

1,400

1,400

Barge 20,000

Upwellers (10) 100,000

Culture Gear 40,824

62,461

16,534

13,392

Walk-in cooler 10,00

0

Freight/Packaging 6,0

75 44,9

55 53,8

12 53,8

12

Supplies 20,000

20,600

21,218

21,855

22,510

23,185

Total Direct Costs 335,51

6 309,10

4 288,66

1 336,27

7 339,30

3 346,74

8

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Overhead

Administration/Bookkeeping 20,0

00 20,60

0 21,21

8 21,8

55 22,5

10 23,1

85

Advertising & Marketing 4,0

00 4,1

20 4,2

44 4,3

71

Dues and Subscriptions 200

206

212

219

225

232

Internet Fees 600

618

637

656

675

696

Licenses and Permits 400

412

424

437

450

464

Maintenance & Repairs 8,000

8,240

8,487

8,742

9,004

9,274

Rent (land-based facilities) 10,000

10,300

10,609

10,927

11,255

11,593

Rent (packing facility) -

15,000

15,450

15,914

16,391

16,883

Postage and Delivery 3

00 3

00 2,0

00 2,0

60 2,1

22 2,1

85

Telephone 2,000

2,060

2,122

2,185

2,251

2,319

Travel & Conferences 3,000

3,090

6,000

6,180

6,365

6,556

Utilities 1,200

1,236

1,273

1,311

1,351

1,391

Fuel 3,500

3,605

3,713

3,825

3,939

4,057

Miscellaneous 3,000

3,090

3,183

3,278

3,377

3,478

Depreciation 21,261

21,899

22,556

23,232

23,929

24,647

Total Overhead 73,4

61 90,65

6 101,88

4 104,94

0 108,08

9 111,33

1

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Sales

Units 0 121,500 899,100 1,076,247 1,076,247 1,076,247Unit Selling Price $0.675 $0.695 $0.716 $0.738 $0.760Revenue $0 $82,037 $625,284 $770,937 $794,065 $817,887

Profit (Loss) and Cash FlowRevenue (Sales) $0 $82,037 $625,284 $770,937 $794,065 $817,887

Direct costs 335,516

309,104

288,661

336,277

339,303

346,748

Indirect costs 73,461

90,656

101,884

104,940

108,089

111,331

Gross Profit (loss) (408,977)

(317,723)

234,740

329,719

346,674

359,808

Cumulative cash (408,977)

(726,700)

(491,960)

(162,241)

184,433

544,240

My Oyster FarmBusiness Plan

(100.000 market oysters/year)The text portion of this business plan can be drawn from the Acme Oyster Farm plan details. The financials are shown below for the first 6 years, and can be found in the accompanying excel spreadsheets in a file called “My Oyster Farm Worksheet May 2005”.

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Direct Costs

Seed Cost 1,000

1,030

1,061

1,093

1,126

1,159

Equipment

Boat 10,000

Truck 5,000

Pressure Washer 700

700

Upweller 10,000

Culture Gear 4,800

4,800

2,400

Freight/Packaging 1,00

0 3,50

0 5,00

0 5,00

0

Supplies 3,000

3,090

3,275

3,374

3,404

3,435

33,500

7,890

8,363

8,614

8,692

8,770

Overhead

Insurance 500

500

500

500

500

500

Advertising & Marketing 40

0 41

2 42

4 43

7

Licenses and Permits 400

412

437

450

463

477

Maintenance & Repairs 1,000

1,030

1,092

1,125

1,158

1,193

Postage and Delivery 5

0 5

0 10

0 10

3 10

6 10

9

Telephone 600

618

655

675

695

716

Fuel 1,200

1,236

1,310

1,349

1,390

1,432

Miscellaneous 300

309

328

337

347

358

3,550

3,655

3,874

3,991

4,110

4,234

Total Expenses 37,050

11,545

12,238

12,605

12,802

13,004

SalesUnits 20,000 70,000 100,000 100,000 100,000Unit Selling Price 0.55 0.55 0.55 0.55 0.55

Revenue $15,200 $49,700 $55,000 $55,000 $55,000         

Net Income (37,050)

3,655

37,462

42,395

42,198

41,996

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 Funding was provided through the Northeastern Regional Aquaculture Center through Grant number xxxxx from the U.S. Department of Agriculture Cooperative State Research, Education, and Extension Service (USDA-CSREES). Any opinions, findings, conclusions or recommendations expressed in the publication are those of the authors and do not necessarily reflect the views of the U.S. Department of Agriculture, the Northeastern Regional Aquaculture Center, or the University of Massachusetts Dartmouth.

NRAC Project No. xxxx

Produced for:

Northeast Regional Aquaculture CenterUniversity of Massachusetts Dartmouth

Violette Building, Room 201285 Old Westport Road

North Dartmouth, MA 02747-2300