November - December 2000
Few lending institutions in Missouri have opportunities to review business or financial plans for aquaculture businesses, so the lack of experience and perception of risk tends to limit the possibilities of institutional financing. A good business plan for an aquaculture business should address the following questions:
Most successful aquaculture businesses are market orientated and have a diversity of satisfied customers. Building the marketing plan should come first. Financial information can be developed to compare with the expected volume of sales.
Decisions about what species to raise, size class and amount to produce, and costs of production should be based on a specific marketing analysis for the business. This analysis should be included as the first section of a written business plan.
The potential farmer should visit with other fish farmers in the area to determine general knowledge about markets. Once the farmer has identified a market, price and volume are important considerations. If the market already exists, it is important to investigate current suppliers. A thorough analysis of the competition is beneficial.
The potential producer can obtain important information by investing time and money to meet with potential customers. The producer should determine specific requirements established by the buyer such as size of fish, frequency of delivery, delivery volumes, and quality standards. Other information the producer should obtain is frequency and form of payment, whether contracts will be necessary, and if there are bonding regulations within the areas receiving the fish. If possible, the producer should obtain signed letters of intent from buyers.
Description of Production System
A full description of the planned production facility, including site information, pond construction, development of reliable water sources for aquaculture production, and equipment needed for the operation should be included in the business plan. Site information should include soil analysis, water quality and availability, as well as proximity to major transportation systems.
A description of the production methods to be used on the fish farm should include stocking rates, feed and feeding rates, harvesting methods, and sources of fingerlings and other materials needed for a successful operation. Expected problems associated with normal fish farming operations should also be noted. All fish farming enterprises involve some risks not common to terrestrial farming that may affect cash flow and ability to repay debt.
Social and Regulatory Aspects of Aquaculture
The social and regulatory aspects of fish farming are important and can affect the success of the business. Some questions that need to be investigated and discussed in the plan are:
Other states may require permits to transport across state lines. Some states have import regulations for live fish based on disease status. Most states have discharge requirements for aquaculture and they are most often administered by the state Department of Natural Resources. Processing fish requires HACCP (Hazard Analysis Critical Control Points) plans administered by the Food and Drug Administration. All potential regulations and concerns should be addressed in the business plan.
Estimate of Financial Needs
The business plan should include information about financial requirements and borrowing needs for the operation. Financial requirements fall into three categories:
Capital investments which include purchase of land as well as construction of ponds, buildings, or other permanent structures.
Equipment purchases which could include aeration devices, seine reels, grading equipment, etc.
Operating expenses which include feed, chemicals, fuel, fingerlings, other variable costs, and hired labor expenses.
The financial needs section should also contain an estimated repayment plan for any borrowed money. In a new operation it may be beneficial to delay principal payments on loans for a year because revenues may be limited until the second full year of operation. Construction of ponds and other facilities could require large capital outlays during the first year. The first crop of salable fish may not be available until sometime during the second year of operation and a lien on the crop may be required.
Description of the Management Team
A description of the management and labor team is usually included in the business plan. Primary management responsibility should be identified and the skills and operational capability described. Resumes of key personnel may be included. An explanation of management and operational procedures should describe how the business will work. If the owner is the primary manager, historical information concerning his/her financial obligations and debt repayment may be included as well as personal references from individuals known in the community concerning overall character and honesty.
Additional information on aquaculture can be obtained through the University Outreach and Extension Centers and Regional Extension Farm Management Specialists
Avault, Jr., J.W., Ph.D. 1996. Fundamentals of Aquaculture, A Step-By-Step Guide to Commercial Aquaculture.
Beem, M. 1991. Aquaculture: Realities and Potentials When Getting Started. SRAC Pub. 441.
Engel, Carole R., and Nathan M. Stone. 1997. Developing Business Proposals for Aquaculture Loans. SRAC Pub. 381.
Garling, D. 1993. Making Plans for Commercial Aquaculture in the North Central Region. MU Pub. MX0391
Missouri Aquaculture Environmental and Regulatory Guide. 1999. Mo. Dept. of Natural Resources, Technical Assistance Program.
Mo. Dept. of Conservation Approved Species List. 2000.