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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
Bullfrogs

Turtles
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 Govt 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
Tropical Ponds
Tropical Raceways
Subtropical Greenhouse
Pond Culture US
Temperate Indoor Tanks

$/lb
0.74
0.75
1.12
1.03
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 Customers 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?
Its a Summary of Cash Inflows & Outflows
Over a Given Period of Time
Its 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 Youre 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


Borrowers Resume Documenting Relevant Experience

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