|dc.description.abstract||Business Ob1ective: The main objective of the proposed aquaculture
business is to raise 100, 000 pounds of rainbow trout annually,
which will achieve a total of $216,000 in annual gross sales.
Product Description: Rainbow trout is Michigan's leading
aquacultural product. This light flavored fish is extremely
popular among Great Lakes consumers. However, the demand for
rainbow trout continues to exceed supply. The proposed business is
being created to meet this demand. Also the growing concern for a
healthier diet will be met through the sale of trout that has been
raised in a controlled environment where careful consideration has
been taken to ensure the fish's nutritional content.
Market Potential and Competition: Every existing aquaculture
business has a piece of the market, with the largest share going to
the rainbow trout farms in Idaho and the catfish farms in
Mississippi. Competition from the western states is strong due to
nearly-perfect farming conditions. Idaho, for example, is able to
charge a lower price than Michigan growers because they have a much
larger water supply. The more water a fishery has to work with,
the more fish it is able to grow. Since Michigan has a sporadic
water table (the water supply varies within the state) and not a
consistent water source like the Snake River in Idaho, it is harder
for Michigan growers to raise large numbers of fish, as compared to
Idaho fisheries. However, Michigan fish farms have found ways to
raise fish competitively in the aquaculture market.
The food fish market in Michigan is small and can be easily
entered. Due to the small number of Michigan fish farms selling
food fish as opposed to game fish, a new aquaculture business would
be welcomed into the food fish market. Wholesalers and retailers
are looking for the chance to buy from local fish growers.
Therefore, once a buying contract is reached, the new business will
be able to compete within the market.
Production operations: The proposed aquaculture business will be
using an indoor raceway system for production. Four raceways will
be built side by side in series of three. The raceway system will
be enclosed in a large pole-frame structure that will also include
an office area. An aquaculturist should be hired so the business
can be run as efficiently and effectively as possible.
The actual production process will begin with the purchase of
27,000 fingerlings, 9,000 in each of three size categories
equaling 3-4" , 4-5" , and 5-6". At the end of each month, the fish
will have grown approximately one inch and will enter the next size
bracket. For example, the 3-4" fish will become 4-5" , the 4-5"
fish will become 5-6" and so on. Therefore at the end of each
month, 9,000 3-4" fingerlings should be purchased to fill the gap
in size difference. At the end of the seventh month, the first
9,000 fish will be 12-13", weighing one pound a piece. These fish
will be sold at $2.00/lb, resulting in $18,000 gross sales.
Consequently, every month, after the seventh month, will produce
9,000 pounds of fish for market. Note that since losses in an
enclosed system will only be due to disease, the mortality rate is
so minimal that it is not figured into the production schedule.
Projected Financial Results: The financial results compiled in the
financial analysis section are promising after the first year. The
capital budget shows $244,755.50 will be needed to start this
business. The income statement for the first year indicates
$108,000 in sales and a net profit of $28,335.89. Using the first
year's net profit, the return on investment was calculated to be·
twelve percent. A twelve percent return on investment for the
first year is good considering that the majority of new businesses
hope to achieve ten to fifteen percent. However, the second year
of operation shows a considerable increase in profit due to sales.
The second year's sales are $216,000 and net profit is $106,922.06.
Return on investment for the second year is thirty nine percent.
An alternative method for financing this business was also looked
into. Obtaining a loan for $150,000 (the cost of the major fixed
assets) at nine percent interest decreases the amount of total
investment and increases the return on equity. Return On Equity
for the first year is sixteen percent, as opposed to a twelve
percent return without financing.
Recommendations: The proposed aquaculture business is feasible.
I recommend this business as a good investment based on the returns
of twelve percent and thirty nine percent in the first and second