Document 169567

Business Plan
Every Business Has Essentially Three Tasks
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
Biologically Possible but Questionable
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
Tropical Ponds
Tropical Raceways
Subtropical Greenhouse
Pond Culture US
Temperate Indoor Tanks
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
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
Distributors, Brokers
Seafood Stores
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
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
Pond Construction
Water Supply
Equipment – Feed Bins
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
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
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