Where can I find info on large scale coral farming?
- Thread starter Whaledriver
- Start date
ctenophore
Premium Member
Just a couple of comments on the ideas posted above.
1) LFS doing the service/pruning thing are going to get burnt by pests sooner or later. Quarantine and a pest-free repuation/guarantee are going to be important soon. Real QT is very time consuming and expensive. Each time you take a frag out of someone's tank, you need to QT else you will eventually get e.g., AEFW or worse.
1a) Corals brought back for growout will need to be maintained in systems that aren't cost effective (400w halides, etc), as mentioned above. Time and space are also issues in a busy LFS.
2) "Scabs" will go away as import regulations tighten. Also, the comment about their irregular supply is correct.
3) Fuel prices might raise the cost of importing to the point that LA middlemen may have real competition from US farms that sell regional wholesale direct. Flying boxes of water around the world is almost as bad as trucking salt mix all over the country. If their $3 farm-gate maricultured coral costs $15 to get to a shop, and my $10 coral only costs $5 to ship, I now have a price advantage as well as the captive-raised, pest-free advantages. Wishful thinking, but it could happen.
What would I consider valuable? Probably the experience of someone who has committed to a real facility. It's really just talk until you've actually started building it and realize how much work it really is. We built our facility from the ground up, literally. From foundation to GH construction to our own electrical engineering and wiring, and of course plumbing, equipment, and system implementation. A plan on paper is neat, but it will almost certainly change. My original CAD drawings were exactly what I wanted at the time, until reality set in.
I don't mind talking about how we set up our facility or about the equipment we built, but as long as it's with someone else who can give good feedback and ideas in return. There are a few features that I still plan to keep proprietary until they've proven themselves and others have discovered them as well, or if the competitive advantage isn't as big as hoped. I've been asked if these tricks are patentable, but filing and litigating patents is not a game for companies in this industry. (my wife is soon to be a patent attorney). Besides, at this level, innovation occurs so cheaply and rapidly that the best way to stay competitive is to embrace and affect change. I love it that way.
Justin
1) LFS doing the service/pruning thing are going to get burnt by pests sooner or later. Quarantine and a pest-free repuation/guarantee are going to be important soon. Real QT is very time consuming and expensive. Each time you take a frag out of someone's tank, you need to QT else you will eventually get e.g., AEFW or worse.
1a) Corals brought back for growout will need to be maintained in systems that aren't cost effective (400w halides, etc), as mentioned above. Time and space are also issues in a busy LFS.
2) "Scabs" will go away as import regulations tighten. Also, the comment about their irregular supply is correct.
3) Fuel prices might raise the cost of importing to the point that LA middlemen may have real competition from US farms that sell regional wholesale direct. Flying boxes of water around the world is almost as bad as trucking salt mix all over the country. If their $3 farm-gate maricultured coral costs $15 to get to a shop, and my $10 coral only costs $5 to ship, I now have a price advantage as well as the captive-raised, pest-free advantages. Wishful thinking, but it could happen.
What would I consider valuable? Probably the experience of someone who has committed to a real facility. It's really just talk until you've actually started building it and realize how much work it really is. We built our facility from the ground up, literally. From foundation to GH construction to our own electrical engineering and wiring, and of course plumbing, equipment, and system implementation. A plan on paper is neat, but it will almost certainly change. My original CAD drawings were exactly what I wanted at the time, until reality set in.
I don't mind talking about how we set up our facility or about the equipment we built, but as long as it's with someone else who can give good feedback and ideas in return. There are a few features that I still plan to keep proprietary until they've proven themselves and others have discovered them as well, or if the competitive advantage isn't as big as hoped. I've been asked if these tricks are patentable, but filing and litigating patents is not a game for companies in this industry. (my wife is soon to be a patent attorney). Besides, at this level, innovation occurs so cheaply and rapidly that the best way to stay competitive is to embrace and affect change. I love it that way.
Justin
Whaledriver
New member
I am a hobbyist that would like to do more. Make money, help the environment and learn. These all sound like things a COOP could help me do effectively.
There are dozens of people who could get 1000 gallon prop system up and going in their homes in any given metropolitan area. If each guy specialized and grew one or to species they could collectively produce enough product to supply a wholesale company.
A COOP could be a entity to help organize and consolidate products to move them down the supply chain. This would essentially be the same job as a buyer in the Pacific but in this case they would do it in a local region.
A COOP would also help with a knowledge base of people to solve problems and share ideas. This sharing would be promoted instead of limited because it would become shared intellectual property of the group instead of one guy try to prevent competition. Since profits are share there is a powerful motivation to help each other out.
There are dozens of people who could get 1000 gallon prop system up and going in their homes in any given metropolitan area. If each guy specialized and grew one or to species they could collectively produce enough product to supply a wholesale company.
A COOP could be a entity to help organize and consolidate products to move them down the supply chain. This would essentially be the same job as a buyer in the Pacific but in this case they would do it in a local region.
A COOP would also help with a knowledge base of people to solve problems and share ideas. This sharing would be promoted instead of limited because it would become shared intellectual property of the group instead of one guy try to prevent competition. Since profits are share there is a powerful motivation to help each other out.
Eric Boerner
Coral Cutter
Might want to check out frags.org. That was the initial intent of that group of people. It just needs to be extended to hit the LFS market, not just hobbiests.
Fascinating thread, some observations, I have been in different parts of the industry, and as a lifetime hobbyist, along with other things in fisheries,
first, temps in Fla greenhouses, workable, check out what the orchid growers do, some of their product is even more heat sensitive then corals, shading on plastic, high sided greenhouses with sides raised way up, slat hourses, they have a number of ways to live with the temps, I have visited many of them in Fla as I have always enjoyed orchids, also, drive around Gibsonton/Riverview and see how some of the freshwater growers handle their housing. Not all Fla fish growers do it in ponds.
Re biz plans for coral propagation, some years ago when I was more trusting then now I was asked to do some articles for garf, I wont comment further on them but the articles are still on their website, including the biz plan, and articles on rock making, Tom Miller and I did the bulk of the articles then on the rock making that they are still working from. The biz plan needs fleshing out but its something to start from. And its free.
My own interest now is just supporting my hobby with a product, in my case cultured rocks with corals on them, I have seen some of my rocks from ten years ago in commercial display tanks and they are impossible to distingush from wild collected. So I know its a product with appeal, and as I amnot going to be commercial I have more time to do them as I want them. Underselling commercial sources no. But competing with quality.
My point is, find a niche if you want to go comercial, and fill it. Unless you want to get big just for being big and spend big bucks figure where your time can get the best return. I've visited Tropicorium, in fact going down again in a few weeks for some starter rock for some other tanks. Dick's is one of the best examples that exists on doing what is possible. He started with one well insulated greenhouse.
Eric commented its easier to heat water then to cool it, true. The other comment that most bizs in the US dont build for storms is equally true. The devastation of Katrina doesnt happen in many other countrys that get the same number of storms. We build cheap because it works, we dont build to last. Another thing to mention, pumps to pull ocean water into a facility are hugely expensive to operate. Unless you are doing a low tech op in the south pacific. The early operation that Aquarium Systems operated in Fla for culturing clowns is a good example, the capitalization was way beyond the payout capabilitys. The product was good, I had a lot of those early tank raised clowns . But, a far smaller operation that produced as many, cheaper was done in Chicago area by one guy , in his basement, working a fulltime job.
Big isnot always better. In agriculture efficiency of scale is quickly overrode and you get on a treadmill that you dont control the speed of. The best example in agriculture is comparing old order Amish dairy farming to the 'modern' next door counterpart. Bottom line, the Amish farmers hold onto a higher percentage of the milk check, and have more time in the same week for family and social events then their 'modern' neighbors. They also help to set up more of their children in farming then the neighbors. This is all well documented. The popular image of the drudgery of Amish low tech farming is erroneous to the extreme.
The same principles apply to aquaculture. Good managed small lower tech operations will outlast large over capitalized ones . Its a matter of efficiency of scale. Lower capitalization also means a better profit margin if other management is in hand .
There is no doubt in my mind that one man, or family operated coral aquaculture operations can be successful. If you look at the ones in operation you will see that the ones staying in business have a niche and fill it well. I think CITES and govt regs will influence that even more.
Just a couple other points; Mexico, probably one of the last places in the world I'd consider being in biz, anything that remotely looks like it's making money will have instant 'partners'. There are many other countrys far friendlier to businesses.
If you can, make a trip to Tropicorium, you'll notice that they have a basic concept, but a number of complementary products, but the major emphasis is still what they have always done best. I cant think of a single existing business that better portrays how to succeed in coral aquaculture.
OTOH, I can show anyone who wants to see them any number of aquaculture operations, mostly in food fish, where the operators are working 65-80 hr weeks just trying to pay the interest on the investment. Forget about principal return. They are years away from that, if they live that long. Several hi tech tilapia operations in the Jordan Valley in Israel come to mind. One of them down the road from a low tech family operation that has made a living for the operators for over ten years. The profitable operation produces about a third of what the hi tech one does, ask the owners if they care.
So, comments from a now retired and disconnected viewer from the side, but, keep in mind, I have seen a LOT of aquaculture ops in the past 30+ years, from multi million dollar world bank funded ops to poverty driven subsistence farmers, and I can point to a number of those subsistence farmers who are out of poverty where the world bank funded ops , a couple in Costa Rica and Panana come to mind are long since flopped.
One last thought, as a believer in God, I think one of the greatest sins that we will answer to Him for isnot using the time that He has given us to do what we love to do, why else did He make us as we are with our talents and have us develop the skills that we have if we are going to be Dilberts ?
Do what you like to do, do it well, and find a niche and fill it. Dont sweat the cut-throats, sooner or later they will cut their own.
Nuff, just my 2 cents, which is a long ways from what it takes to buy a cup of coffee. Thanks for your time if you've read this far.
Enjoy.
Next ?
first, temps in Fla greenhouses, workable, check out what the orchid growers do, some of their product is even more heat sensitive then corals, shading on plastic, high sided greenhouses with sides raised way up, slat hourses, they have a number of ways to live with the temps, I have visited many of them in Fla as I have always enjoyed orchids, also, drive around Gibsonton/Riverview and see how some of the freshwater growers handle their housing. Not all Fla fish growers do it in ponds.
Re biz plans for coral propagation, some years ago when I was more trusting then now I was asked to do some articles for garf, I wont comment further on them but the articles are still on their website, including the biz plan, and articles on rock making, Tom Miller and I did the bulk of the articles then on the rock making that they are still working from. The biz plan needs fleshing out but its something to start from. And its free.
My own interest now is just supporting my hobby with a product, in my case cultured rocks with corals on them, I have seen some of my rocks from ten years ago in commercial display tanks and they are impossible to distingush from wild collected. So I know its a product with appeal, and as I amnot going to be commercial I have more time to do them as I want them. Underselling commercial sources no. But competing with quality.
My point is, find a niche if you want to go comercial, and fill it. Unless you want to get big just for being big and spend big bucks figure where your time can get the best return. I've visited Tropicorium, in fact going down again in a few weeks for some starter rock for some other tanks. Dick's is one of the best examples that exists on doing what is possible. He started with one well insulated greenhouse.
Eric commented its easier to heat water then to cool it, true. The other comment that most bizs in the US dont build for storms is equally true. The devastation of Katrina doesnt happen in many other countrys that get the same number of storms. We build cheap because it works, we dont build to last. Another thing to mention, pumps to pull ocean water into a facility are hugely expensive to operate. Unless you are doing a low tech op in the south pacific. The early operation that Aquarium Systems operated in Fla for culturing clowns is a good example, the capitalization was way beyond the payout capabilitys. The product was good, I had a lot of those early tank raised clowns . But, a far smaller operation that produced as many, cheaper was done in Chicago area by one guy , in his basement, working a fulltime job.
Big isnot always better. In agriculture efficiency of scale is quickly overrode and you get on a treadmill that you dont control the speed of. The best example in agriculture is comparing old order Amish dairy farming to the 'modern' next door counterpart. Bottom line, the Amish farmers hold onto a higher percentage of the milk check, and have more time in the same week for family and social events then their 'modern' neighbors. They also help to set up more of their children in farming then the neighbors. This is all well documented. The popular image of the drudgery of Amish low tech farming is erroneous to the extreme.
The same principles apply to aquaculture. Good managed small lower tech operations will outlast large over capitalized ones . Its a matter of efficiency of scale. Lower capitalization also means a better profit margin if other management is in hand .
There is no doubt in my mind that one man, or family operated coral aquaculture operations can be successful. If you look at the ones in operation you will see that the ones staying in business have a niche and fill it well. I think CITES and govt regs will influence that even more.
Just a couple other points; Mexico, probably one of the last places in the world I'd consider being in biz, anything that remotely looks like it's making money will have instant 'partners'. There are many other countrys far friendlier to businesses.
If you can, make a trip to Tropicorium, you'll notice that they have a basic concept, but a number of complementary products, but the major emphasis is still what they have always done best. I cant think of a single existing business that better portrays how to succeed in coral aquaculture.
OTOH, I can show anyone who wants to see them any number of aquaculture operations, mostly in food fish, where the operators are working 65-80 hr weeks just trying to pay the interest on the investment. Forget about principal return. They are years away from that, if they live that long. Several hi tech tilapia operations in the Jordan Valley in Israel come to mind. One of them down the road from a low tech family operation that has made a living for the operators for over ten years. The profitable operation produces about a third of what the hi tech one does, ask the owners if they care.
So, comments from a now retired and disconnected viewer from the side, but, keep in mind, I have seen a LOT of aquaculture ops in the past 30+ years, from multi million dollar world bank funded ops to poverty driven subsistence farmers, and I can point to a number of those subsistence farmers who are out of poverty where the world bank funded ops , a couple in Costa Rica and Panana come to mind are long since flopped.
One last thought, as a believer in God, I think one of the greatest sins that we will answer to Him for isnot using the time that He has given us to do what we love to do, why else did He make us as we are with our talents and have us develop the skills that we have if we are going to be Dilberts ?
Do what you like to do, do it well, and find a niche and fill it. Dont sweat the cut-throats, sooner or later they will cut their own.
Nuff, just my 2 cents, which is a long ways from what it takes to buy a cup of coffee. Thanks for your time if you've read this far.
Enjoy.
Next ?
Jake very nice post... more to follow
Justin, agreed on all counts. especially the cost of imports. I have read, from Fedex and DHL financial postings, that if domestically traded fuels hit 80/barrel they will have to put a 20%+ premium on mid-range(further than local) and longer shipments. That is real potential and again is why the coop idea makes sense. As far as the initial version of my plan versus final implementation plans, I know exactly what you mean. I am just glad I could make the guy at the SBA laugh, but it did help me to begin to realize exactly what Jake is saying, and I will get to below. The point is that I agree with you that there is far more to this than getting some ideas together. As boring as the planning is, it is nothing compared to the implementation. I am obviously not as far as you having just finished pulling my own teeth, uhm, I mean getting a place to setup and all of the permits that I will need. I have just set my final equipment list and am waiting on the building of the first greenhouse. I can't tell you how ready I am to get started, despite what challenges I know are headed my way. I, like you I am sure, am almost looking forward to them.
WhaleDriver brings up a very good point and one that I was going to share in my business plan but I will get to now. The idea of shared value, and how a single small facility can benefit the larger group. The reason why I would like to welcome anyone with something (ideas, facilities, skills, desirable products, etc.) resembling interest is just for that reason. Say a small scale farmer has some stable level of capacity that they are interested in offering, or If a small scale farmer wants to work on a signature peice and offer it within the regional market by joining the group, the group should be happy to offer that piece or the products from the facility as part of its "catalog". In the case of a signature piece, if multiple regions could work together, that piece (within a few months) could be available to all of the regions, and the original person could take a place within the larger group as a result and grow within it. I picture it something like a smaller company that exists within the corporate umbrella of another but retains its autonomy of operation. The person then could offer anything from production capacity to ideas and be compensated for them. I will admit I am very nebulous on this still as I have only been trying to work it out for a month or so, but it definitely seems promising.
My thoughts so far:
A coop I think would be a great start but because this is such new territory it would be hard to work the large decisions through a coop. From what I am finding coops work best in well defined and largely established industries where huge volumes of product are dealt with and products and procedures are well defined by years of previous innovation. This unfortunately doen't exist, as best as I can tell for the aquaculturist. Distribution channels are another great idea but then you run the risk of just inserting another middleman, and losing the advantages in pricing. I would like to see it taken a step further than just distribution channels that work together and see it as some sort of business entity in and of itself. I have just begun trying to get some thoughts together on this, but I am working on some interesting scenarios. If anyone else has some ideas, or is interested in discussing this pm me. I have been trying to look at it as a cross between a straight coop and a public company with stock. Interestingly when you try to provide for the regionality it starts drifting into more of a series of treaties between the regions that operate somewhat autonomously. The biggest benefits come from shared marketing and order fulfillment. The downside is how do you maintain the ability to innovate when the group gets big and you run into governing issues.
Jake,
Your articles on Garf (especially the how to make 50k one) on the business side, as well as many of Eric Borneman's on propogation and sustainability, along Anthony's book, and all the others who make this such a great hobby, are responsible for getting me into this "mess" in the first place. Not so much because I think I could make a huge amount of money but because it is such an interesting arena, and I love the idea of seeing how ecosystems work. Your thoughts on the business scale are a great lesson, and one of the most important things I learned from my business plan reviews. I would agree that not many people, especially starting out, have any idea of how much work is involved with trying to run a large scale operation, especially in this line of work, with the lack of automation that this industry currently affords.
?Do you think that a group of small to medium sized facilities could overcome the reverse economy of scale issues you were referring too, or do you think that based on the current state of the industry there is just a limit as to what any single entity can do within it??
Justin, agreed on all counts. especially the cost of imports. I have read, from Fedex and DHL financial postings, that if domestically traded fuels hit 80/barrel they will have to put a 20%+ premium on mid-range(further than local) and longer shipments. That is real potential and again is why the coop idea makes sense. As far as the initial version of my plan versus final implementation plans, I know exactly what you mean. I am just glad I could make the guy at the SBA laugh, but it did help me to begin to realize exactly what Jake is saying, and I will get to below. The point is that I agree with you that there is far more to this than getting some ideas together. As boring as the planning is, it is nothing compared to the implementation. I am obviously not as far as you having just finished pulling my own teeth, uhm, I mean getting a place to setup and all of the permits that I will need. I have just set my final equipment list and am waiting on the building of the first greenhouse. I can't tell you how ready I am to get started, despite what challenges I know are headed my way. I, like you I am sure, am almost looking forward to them.
WhaleDriver brings up a very good point and one that I was going to share in my business plan but I will get to now. The idea of shared value, and how a single small facility can benefit the larger group. The reason why I would like to welcome anyone with something (ideas, facilities, skills, desirable products, etc.) resembling interest is just for that reason. Say a small scale farmer has some stable level of capacity that they are interested in offering, or If a small scale farmer wants to work on a signature peice and offer it within the regional market by joining the group, the group should be happy to offer that piece or the products from the facility as part of its "catalog". In the case of a signature piece, if multiple regions could work together, that piece (within a few months) could be available to all of the regions, and the original person could take a place within the larger group as a result and grow within it. I picture it something like a smaller company that exists within the corporate umbrella of another but retains its autonomy of operation. The person then could offer anything from production capacity to ideas and be compensated for them. I will admit I am very nebulous on this still as I have only been trying to work it out for a month or so, but it definitely seems promising.
My thoughts so far:
A coop I think would be a great start but because this is such new territory it would be hard to work the large decisions through a coop. From what I am finding coops work best in well defined and largely established industries where huge volumes of product are dealt with and products and procedures are well defined by years of previous innovation. This unfortunately doen't exist, as best as I can tell for the aquaculturist. Distribution channels are another great idea but then you run the risk of just inserting another middleman, and losing the advantages in pricing. I would like to see it taken a step further than just distribution channels that work together and see it as some sort of business entity in and of itself. I have just begun trying to get some thoughts together on this, but I am working on some interesting scenarios. If anyone else has some ideas, or is interested in discussing this pm me. I have been trying to look at it as a cross between a straight coop and a public company with stock. Interestingly when you try to provide for the regionality it starts drifting into more of a series of treaties between the regions that operate somewhat autonomously. The biggest benefits come from shared marketing and order fulfillment. The downside is how do you maintain the ability to innovate when the group gets big and you run into governing issues.
Jake,
Your articles on Garf (especially the how to make 50k one) on the business side, as well as many of Eric Borneman's on propogation and sustainability, along Anthony's book, and all the others who make this such a great hobby, are responsible for getting me into this "mess" in the first place. Not so much because I think I could make a huge amount of money but because it is such an interesting arena, and I love the idea of seeing how ecosystems work. Your thoughts on the business scale are a great lesson, and one of the most important things I learned from my business plan reviews. I would agree that not many people, especially starting out, have any idea of how much work is involved with trying to run a large scale operation, especially in this line of work, with the lack of automation that this industry currently affords.
?Do you think that a group of small to medium sized facilities could overcome the reverse economy of scale issues you were referring too, or do you think that based on the current state of the industry there is just a limit as to what any single entity can do within it??
Hello Raaden
whats are we calling a medium size facility? Inventory or number of employees ? Dick Perrin employee numbers is a small business. Inventory wise he is at least a medium. Dollarwise he is what 3/4 million ? A million ? How many crocea @ $70 ea ??
At what point did he become one of the largest facilitys of its type in the country ? My point being in the aquaculture businesses that I know of business size is on a smaller scale then many others. Ross Socoloff probably built one of the largest, ifnot the largest based on sales and value, its undergone a number of restructurings, I worked there in the 70s during one of those when it was 'owned' by a retail chain, thankfully Ross extricated himself from that bunch.
Typically what I have seen is 1-2 principals, and 4-6 employees for successful operations with the larger ones up to 12 employees. I know pet stores with more employees and so do most of you. To make a long story short, I dont really think it is necessary to have a huge scaled business in this industry.
There is a graph where the horizontal measurement is total sales, and the vertical measurement reading is employees, and you fairly quickly reach a point where as the number of employees increases the increase in sales slows markedly down to where it remains static. There is a point in the beginning of a new business once it is operational where an increase in labor can make an appreciable increase in income, very soon though more labor has a negative impact on net income.
I think by the nature of the business the size of most separate entitys will be small compared to other industrys. Our facilitys tend to be more intensive then extensive. ***** shippers tend to have the largest staffs, but just a couple days a week.
So, small businesses are the norm. OTOH, a number of small businesses filling different niches can certainly profit by association. An example is the many greenhouse coops around the world where different producers grow different products. From herbs to greens to restaurant tomatoes, cukes and squash, each specialize in a type of produce and they are all marketed through coops which sell their produce, receive it and ship/deliver it. One of the advantages to this type of structure is leaving producers free to do what they do best-produce, and centralizing sales and handling. Another advantage is smoothing out peaks and valleys in productions and sales. This has also been done sucessfully in Fla freshwater fish.
Good points made above on the increase in fuel costs , one thing that is true in the history of the aquarium industry is that in hard/tight times the business has tended to do well, as fuel prices rise more people stay home and spe nd more time with their aquaria. Also, as CITES tightens shipping, and protectionism increases AC products will increase in sales. I think there are going to be a lot of opportunitys for good operators. But then, looking back over the past hundred years in our hobby there have always been opportunitys for good operators.
If I had a choice between starting in the business say 30 years ago, or being able to start today I'd take today in a heartbeat. I think a good manager who knows the livestock well has an equal chance to make a good living either finding his own niche and filling it or working with others to increase sales.
One last food for thought: if, you are making a business plan for grants, go for it, but, if its for a loan, give it a LOT more thought, gross income divides up nicely between operating costs and salarys, adding in debt repayment off the top makes the other two categorys much more modest. If starting out I wouldnt go for anymore debt then could be had maxing out a credit card. Thats a slower path, but surer. It makes your wife a lot more amenable if you can give her a nice dinner and night out before you pay that $ 2,000 for corals.
Nuff.
jake
whats are we calling a medium size facility? Inventory or number of employees ? Dick Perrin employee numbers is a small business. Inventory wise he is at least a medium. Dollarwise he is what 3/4 million ? A million ? How many crocea @ $70 ea ??
At what point did he become one of the largest facilitys of its type in the country ? My point being in the aquaculture businesses that I know of business size is on a smaller scale then many others. Ross Socoloff probably built one of the largest, ifnot the largest based on sales and value, its undergone a number of restructurings, I worked there in the 70s during one of those when it was 'owned' by a retail chain, thankfully Ross extricated himself from that bunch.
Typically what I have seen is 1-2 principals, and 4-6 employees for successful operations with the larger ones up to 12 employees. I know pet stores with more employees and so do most of you. To make a long story short, I dont really think it is necessary to have a huge scaled business in this industry.
There is a graph where the horizontal measurement is total sales, and the vertical measurement reading is employees, and you fairly quickly reach a point where as the number of employees increases the increase in sales slows markedly down to where it remains static. There is a point in the beginning of a new business once it is operational where an increase in labor can make an appreciable increase in income, very soon though more labor has a negative impact on net income.
I think by the nature of the business the size of most separate entitys will be small compared to other industrys. Our facilitys tend to be more intensive then extensive. ***** shippers tend to have the largest staffs, but just a couple days a week.
So, small businesses are the norm. OTOH, a number of small businesses filling different niches can certainly profit by association. An example is the many greenhouse coops around the world where different producers grow different products. From herbs to greens to restaurant tomatoes, cukes and squash, each specialize in a type of produce and they are all marketed through coops which sell their produce, receive it and ship/deliver it. One of the advantages to this type of structure is leaving producers free to do what they do best-produce, and centralizing sales and handling. Another advantage is smoothing out peaks and valleys in productions and sales. This has also been done sucessfully in Fla freshwater fish.
Good points made above on the increase in fuel costs , one thing that is true in the history of the aquarium industry is that in hard/tight times the business has tended to do well, as fuel prices rise more people stay home and spe nd more time with their aquaria. Also, as CITES tightens shipping, and protectionism increases AC products will increase in sales. I think there are going to be a lot of opportunitys for good operators. But then, looking back over the past hundred years in our hobby there have always been opportunitys for good operators.
If I had a choice between starting in the business say 30 years ago, or being able to start today I'd take today in a heartbeat. I think a good manager who knows the livestock well has an equal chance to make a good living either finding his own niche and filling it or working with others to increase sales.
One last food for thought: if, you are making a business plan for grants, go for it, but, if its for a loan, give it a LOT more thought, gross income divides up nicely between operating costs and salarys, adding in debt repayment off the top makes the other two categorys much more modest. If starting out I wouldnt go for anymore debt then could be had maxing out a credit card. Thats a slower path, but surer. It makes your wife a lot more amenable if you can give her a nice dinner and night out before you pay that $ 2,000 for corals.
Nuff.
jake
ctenophore
Premium Member
Matt and I have talked about the exact same co-op ideas. I like the idea of shared marketing and order fulfillment, and with good technology, these aspects need not have much overhead (i.e., middlemen). My background is in enterprise software so it's easy(er) for me to do things like that. I have good front and back end technology in my shop at basically zero cash cost, and I suppose that could be extended to any co-op in which I participate.
The only downsides to shared order fulfillment are the potential increase in shipping costs due to not being able to optimize container space, and shipping delays due to the farm or the carrier. If a store goes to a co-op website and orders a few boxes of coral, the expectation is to go pick them up at the airport at an agreed-upon time. If one box doesn't make it because one farm messes up, that hurts the co-op's image. Anything but drop-shipping directly from the farms means you might as well have a distributor. I suppose if the fact that an order may come from several different physical locations is disclosed up front, it may be that the practice would gain acceptance, especially if it meant a 25% savings. I can think of a few technological solutions to this problem though. I plan on shipping direct to retailers, co-op or no.
I think facility size should be measured by inventory/output. Number of employees is just a measure of efficiency.
Raaden, if you have permits then IMO you are 50% done already
The only downsides to shared order fulfillment are the potential increase in shipping costs due to not being able to optimize container space, and shipping delays due to the farm or the carrier. If a store goes to a co-op website and orders a few boxes of coral, the expectation is to go pick them up at the airport at an agreed-upon time. If one box doesn't make it because one farm messes up, that hurts the co-op's image. Anything but drop-shipping directly from the farms means you might as well have a distributor. I suppose if the fact that an order may come from several different physical locations is disclosed up front, it may be that the practice would gain acceptance, especially if it meant a 25% savings. I can think of a few technological solutions to this problem though. I plan on shipping direct to retailers, co-op or no.
I think facility size should be measured by inventory/output. Number of employees is just a measure of efficiency.
Raaden, if you have permits then IMO you are 50% done already
Whaledriver
New member
A coop should be viable in a small area within reach of a major airport. This is kind of pie in the sky thinking but if there was a non profit group that helped start things off it should be viable. Some save the reef group that would love to reduce the need for frags from the wild might think this is a worthy project. And it might lead to some tax benifits.
Whaledriver,
I hope this information is useful and on topic. If not, I am not opposed to taking this to another thread because I would like to continue the discussion that has evolved. I has been nice to hear the reefgods (Steven, Jake, etc) weigh in. It seems if we continue here the information in the thread could be the answer to the original question.
Jake,
For reference I would consider a medium facility to be somewhere between what you can do in a garage (although this could potentially work as well) and topping out at about what Treefarmer or Ctenophore are speaking of, probably in the 500-2500 pieces a month. Like you and Ctenophore referred to I wouldn't really consider sales or employees as measurements. I think both of these would be completely different looking under a coop. Tropicorium I would definitely consider to be a large scale operation. I didn't realize Perrin was doing that much business, that is great. Not sure what his margin is but he has lots of room with a number like that. One of the things that pushed me over the edge towards the farm is that with some part-time help (probably 2 people) I could easily work through the first two years of business, versus the store I was looking at purchasing; I needed 8 employees at almost full time hours just to remain the same size. I am not sure the farm will do the same amount of business (in $$'s) but the margin looked much better.
The origins of my research into the coop idea came when I had someone who does farm raised shrimp look at my plan he suggested that it would be a good idea and wished he would have pushed the point when he started in aquaculture. From there it just kept festering into more and more evolved ideas. My basis has always been would I want to join if I were just starting out. I figure if it makes sense to the new guy and the originators, and doesn't stall the overall entity then the idea has to be worthwhile. I am stuck on a few points that I can't iron out but I hope that if I keep looking at other industry models and cobble the best parts together that it will eventually become a good enough idea. I am not sure that centralizing the products themselveswould be cost effective, as double shipping would eat away any pricing advantage unless the numbers were huge, but centralizing the administration and product management as well as making the total entity attractive to a new line of customers (distributors and extra-local retailers) seems to have enough incentive to make it a go.
Glad to hear you think it is a worthwhile effort, and I appreciate your cautious words. Personally I am always looking for the odd grant to help the operation out, but it seems that those are a bit slim. I am not going the loan route either though (not for lack of trying it was just hard to convince lenders that the business was viable without a real model to show them). I am going to begin with personal funds that I have set aside for starting a business, and work the business itself until it become self-sustaining. If your caution for getting a loan was to give it alot more thought; I would say if you are using personal funding give it Alot, Alot more and then even more thought before getting into it. I have been ready to start a few businesses (written four full business plans in the last 15 years) but just never found one that I really wanted to pull the trigger or were financially out of my reach until now. Luckily for me my wife is looking forward to this just as much as I am so I think that may smooth out some of the edges that others may encounter.
ctenophore,
Back end technology is one of the largest keys to making a coop successful especially in production, fulfillment and management as they will lower each members overhead. But other things like product trending, shared research and knowledge base, and potentially a global Brand could provide a serious competitve advantage that allows equal footing with the importers. The right software would be a huge part of this, and there are some really good models out there that have been making this idea work. Amazon is a good example of how this could work, although it is a bit of a stretch because of the shipping and perishability issues. Anyway, I could order 15 products from them but they may come from three distinct places and three different retailers. Yes you would lose some margin from the increased shipping fees, but some of that could be recouped by having the global entity maintain a shipping account and use the volume to cut the overall costs. I am not sure whether this would be less than having all product shipped to a holding site and shipping it out from there or not. The former may be a better scenario if the end consumer is the target market, but if the shipments are large enough and are to distributors or retail facilities the numbers look better for drop shipping. I don't think retailers would be terribly concerned with multiple physical shipments as I believe most have storeside delivery anyway. I agree with the missed shipment's problem but if the fulfillment process of the coop is good enough that shouldn't be a common enough occurrence to hurt very much, and if things are regionalized by the shipping platform there shouldn't be much of a difference in shipping times.
The one thing that concerns me is product diversity, and overproduction. This is something that I have not been able to come up with a solution for. If it truly is to be modeled after a coop what happens if a particular region becomes oversaturated because everyone wants to produce the same stuff and the region cannot bear the production capacity. Should the coop entity have some say as to what is produced at the individual operations. The issues breakdown as follows:
1. How does the coop choose 1 farms product over another if there is existing product on hand. In this case the only thing I can come up with would be product submitted for fulfillment first goes out first, obviously it is more complicated than this but... This could potentially hurt the little guy if he submits 5 pieces after a larger farm submits 150 and the market demand is 50/week. On the other hand if it is a %based fulfillment then all parties have to hang onto product for extended times. Neither of these seems to be a good answer.
2. It would seem to be a better option to let the larger entity have some say over what each farm is producing. Then the coop could take advantage of the large pool of data to do capacity planning like large manufacturers do. The problem would be if you were a small scale farm would you like someone telling you that you need to stop producing this thing you really like simply because the market cannot bear it at the time. I don't think that would go over well.
The only realistic options I can see are to go with the first and let supply and demand have its way or to have to coop dole out product contracts. The product contracts seem interesting and would meet all of the points noted above I have just never seen something like this in action to tell if it works on a larger scale. This would allow the coop to forecast capacity and the farmer to grow something that he has chosen. The only downside is what if the market turns quickly and a farmer is stuck with product he has been contracted for, and who is responsible for the research and contract managment. It seems like an awful lot of work, and I am not sure of the value.
Would love to hear some input on this or other possible solutions !!
I hope this information is useful and on topic. If not, I am not opposed to taking this to another thread because I would like to continue the discussion that has evolved. I has been nice to hear the reefgods (Steven, Jake, etc) weigh in. It seems if we continue here the information in the thread could be the answer to the original question.
Jake,
For reference I would consider a medium facility to be somewhere between what you can do in a garage (although this could potentially work as well) and topping out at about what Treefarmer or Ctenophore are speaking of, probably in the 500-2500 pieces a month. Like you and Ctenophore referred to I wouldn't really consider sales or employees as measurements. I think both of these would be completely different looking under a coop. Tropicorium I would definitely consider to be a large scale operation. I didn't realize Perrin was doing that much business, that is great. Not sure what his margin is but he has lots of room with a number like that. One of the things that pushed me over the edge towards the farm is that with some part-time help (probably 2 people) I could easily work through the first two years of business, versus the store I was looking at purchasing; I needed 8 employees at almost full time hours just to remain the same size. I am not sure the farm will do the same amount of business (in $$'s) but the margin looked much better.
The origins of my research into the coop idea came when I had someone who does farm raised shrimp look at my plan he suggested that it would be a good idea and wished he would have pushed the point when he started in aquaculture. From there it just kept festering into more and more evolved ideas. My basis has always been would I want to join if I were just starting out. I figure if it makes sense to the new guy and the originators, and doesn't stall the overall entity then the idea has to be worthwhile. I am stuck on a few points that I can't iron out but I hope that if I keep looking at other industry models and cobble the best parts together that it will eventually become a good enough idea. I am not sure that centralizing the products themselveswould be cost effective, as double shipping would eat away any pricing advantage unless the numbers were huge, but centralizing the administration and product management as well as making the total entity attractive to a new line of customers (distributors and extra-local retailers) seems to have enough incentive to make it a go.
Glad to hear you think it is a worthwhile effort, and I appreciate your cautious words. Personally I am always looking for the odd grant to help the operation out, but it seems that those are a bit slim. I am not going the loan route either though (not for lack of trying it was just hard to convince lenders that the business was viable without a real model to show them). I am going to begin with personal funds that I have set aside for starting a business, and work the business itself until it become self-sustaining. If your caution for getting a loan was to give it alot more thought; I would say if you are using personal funding give it Alot, Alot more and then even more thought before getting into it. I have been ready to start a few businesses (written four full business plans in the last 15 years) but just never found one that I really wanted to pull the trigger or were financially out of my reach until now. Luckily for me my wife is looking forward to this just as much as I am so I think that may smooth out some of the edges that others may encounter.
ctenophore,
Back end technology is one of the largest keys to making a coop successful especially in production, fulfillment and management as they will lower each members overhead. But other things like product trending, shared research and knowledge base, and potentially a global Brand could provide a serious competitve advantage that allows equal footing with the importers. The right software would be a huge part of this, and there are some really good models out there that have been making this idea work. Amazon is a good example of how this could work, although it is a bit of a stretch because of the shipping and perishability issues. Anyway, I could order 15 products from them but they may come from three distinct places and three different retailers. Yes you would lose some margin from the increased shipping fees, but some of that could be recouped by having the global entity maintain a shipping account and use the volume to cut the overall costs. I am not sure whether this would be less than having all product shipped to a holding site and shipping it out from there or not. The former may be a better scenario if the end consumer is the target market, but if the shipments are large enough and are to distributors or retail facilities the numbers look better for drop shipping. I don't think retailers would be terribly concerned with multiple physical shipments as I believe most have storeside delivery anyway. I agree with the missed shipment's problem but if the fulfillment process of the coop is good enough that shouldn't be a common enough occurrence to hurt very much, and if things are regionalized by the shipping platform there shouldn't be much of a difference in shipping times.
The one thing that concerns me is product diversity, and overproduction. This is something that I have not been able to come up with a solution for. If it truly is to be modeled after a coop what happens if a particular region becomes oversaturated because everyone wants to produce the same stuff and the region cannot bear the production capacity. Should the coop entity have some say as to what is produced at the individual operations. The issues breakdown as follows:
1. How does the coop choose 1 farms product over another if there is existing product on hand. In this case the only thing I can come up with would be product submitted for fulfillment first goes out first, obviously it is more complicated than this but... This could potentially hurt the little guy if he submits 5 pieces after a larger farm submits 150 and the market demand is 50/week. On the other hand if it is a %based fulfillment then all parties have to hang onto product for extended times. Neither of these seems to be a good answer.
2. It would seem to be a better option to let the larger entity have some say over what each farm is producing. Then the coop could take advantage of the large pool of data to do capacity planning like large manufacturers do. The problem would be if you were a small scale farm would you like someone telling you that you need to stop producing this thing you really like simply because the market cannot bear it at the time. I don't think that would go over well.
The only realistic options I can see are to go with the first and let supply and demand have its way or to have to coop dole out product contracts. The product contracts seem interesting and would meet all of the points noted above I have just never seen something like this in action to tell if it works on a larger scale. This would allow the coop to forecast capacity and the farmer to grow something that he has chosen. The only downside is what if the market turns quickly and a farmer is stuck with product he has been contracted for, and who is responsible for the research and contract managment. It seems like an awful lot of work, and I am not sure of the value.
Would love to hear some input on this or other possible solutions !!
Treeman
New member
Raaden,
Where is your location?
I believe that one of the things that would make the coop work would be a region of farmers would make up the coop. That way you could buy/trade from each other as the orders need to be filled. You would ship out your own orders but you could include other coop members corals with yours. The regional thing would lower the transfer costs.
Branding per the coop would be another.
Sorry about the choppy sentences... I hate typing.
Where is your location?
I believe that one of the things that would make the coop work would be a region of farmers would make up the coop. That way you could buy/trade from each other as the orders need to be filled. You would ship out your own orders but you could include other coop members corals with yours. The regional thing would lower the transfer costs.
Branding per the coop would be another.
Sorry about the choppy sentences... I hate typing.
ctenophore
Premium Member
Matt's idea of a coop being a loosely coupled network of farmers buying and selling as demand dictates amongst themselves would have less overhead than a centralized organization. I see a coop as more of a set of guidelines and shared resource agreements more than a central governing body with contracts, regulations, and a distribution center. The latter requires a facility, staff, and lawyers. Besides, I think customers would rather be able to buy direct from many regional farms rather than one entity. Choice and competition are always better than a protectionist monopoly.
Justin
Justin
Treeman,
I am in Raleigh/Durham which seems to be turning into the next hotbed of coral farming with redox and hamburglar not but 1.5hrs away and Red Sonja I think was working on a plan as well. Hopefully they will want to jump onboard and see how this thing works.
vest0830
Solar power would be a great thing but atleast for me the space concerns have ruled it out. The space that the panels would take up will be used for further greenhouse expansion. If the actual handling facilities grow in space (only 800 sf right now) I may look at putting some panels on top as just about everything I have right now runs on electricity.
I am in Raleigh/Durham which seems to be turning into the next hotbed of coral farming with redox and hamburglar not but 1.5hrs away and Red Sonja I think was working on a plan as well. Hopefully they will want to jump onboard and see how this thing works.
vest0830
Solar power would be a great thing but atleast for me the space concerns have ruled it out. The space that the panels would take up will be used for further greenhouse expansion. If the actual handling facilities grow in space (only 800 sf right now) I may look at putting some panels on top as just about everything I have right now runs on electricity.
I just checked back on this thread and was surprised at the way it has evolved. Alot of good food for thought but it sounds like the coop idea is trying to run before it crawls. Before worrying about software and management problems the business part has to be viable to every party investing money. Show me one coral farm that doesnt grow xenia, star polyps, leathers and shrooms. its the bread and butter of this business. How are you going to ask a farm to grow sps and lps for your coop when it would be much more profitable to grow the softies? For farms to raise multiple species at the numbers you would need to support this kind of infrastructure they would have to be enourmous. small and medium sized farms will never be able to get consistent yields unless they dedicate their square footage to very few if not single species.
There are tons of people with small operations around the country right now and almost no large operations. If there is any truely viable coop oppurtunities that can take advantage of the current state of coral farming i think its going to have to be based around organizing smaller farms together.
For a coop to work there has to be standards for each product. There must be size, color and health specifications for each species grown. Defining these standards and finding enough growers who can produce enough corals that meet these standards is going to be tough. With thousands of coral species and many variations of the same species its not going to be an easy task.
I also think that u have to almost completely eliminate shipping by air to be able to realistically provide a competitive price and still have enough money for the grower. This forces the coop to be more of a localized group. I strongly doubt u would be able to fly in product from each farm to a central location and then reship to a customer and make any money at it.
The only way i can see a coop getting off the ground is for multiple localized farms to meet and agree on a single species to grow with strict standards in size and quality. A local distributor large enough to move the quantities and pay the agreed on price is also necessary. This allows each farm to continue in the niche they have found for themselves already and have another consistent source of income from the common crop. If this works for one species in time it can be done for many.
There are tons of people with small operations around the country right now and almost no large operations. If there is any truely viable coop oppurtunities that can take advantage of the current state of coral farming i think its going to have to be based around organizing smaller farms together.
For a coop to work there has to be standards for each product. There must be size, color and health specifications for each species grown. Defining these standards and finding enough growers who can produce enough corals that meet these standards is going to be tough. With thousands of coral species and many variations of the same species its not going to be an easy task.
I also think that u have to almost completely eliminate shipping by air to be able to realistically provide a competitive price and still have enough money for the grower. This forces the coop to be more of a localized group. I strongly doubt u would be able to fly in product from each farm to a central location and then reship to a customer and make any money at it.
The only way i can see a coop getting off the ground is for multiple localized farms to meet and agree on a single species to grow with strict standards in size and quality. A local distributor large enough to move the quantities and pay the agreed on price is also necessary. This allows each farm to continue in the niche they have found for themselves already and have another consistent source of income from the common crop. If this works for one species in time it can be done for many.
Whaledriver
New member
It seems to me that a non profit centralized bussiness hub could control the coop. This would allow many for profit growers to be the spokes to the wheel.
As a non profit entity it could help set up growers and control what is grown and how it is sold without the burden of a heavy overhead cost. This concept might help reduce tensions in a group of people trying to make a profit.
I would think a meeting of the group would decide who grows what and eliminate duplication and overstock
As a non profit entity it could help set up growers and control what is grown and how it is sold without the burden of a heavy overhead cost. This concept might help reduce tensions in a group of people trying to make a profit.
I would think a meeting of the group would decide who grows what and eliminate duplication and overstock
An independant party controlling the hub is a good idea, but i dont agree with it being non profit. The Hub will have to be the ditributor buying the corals. these are not oranges or apples here. stress from moving corals is something we are tyring to avoid. moving them from growout tanks to a hub and then to a distributor is added risk that we dont need to take. It also creates another cost factor to have to setup dedicated holding and packing system and pay people to work there.
Eric Boerner
Coral Cutter
The frag hub idea has been tried and failed, at least under the folks that were doing it.
The basic premise was that there was one portal with frags from a large number of growers. The buyer could order seemlessly from a large list of frags, and orders were sent out to all the farmers with stock on hand.
Shipping time to get from point A to B to Buyer was lengthy and costly. I have no idea what the mortality rate was, but I"ll bet it was pretty high.
A second attempt was done to consolidate farmers in certain areas and have them group up shipping straight to the buyer without the middle man. Still didn't work.
I think what would need to happen to make this kind of idea work is that the farmers basically would be industrial farms for a large wholesaler, who would then sell directly to retailers in mass stock. They would hold frags in their own tanks until they got a big request from LFS's. Not nessisarily growing them, just holding them.
This of course adds $$$ to the final cost of the aquafrags, which I think is the major drawback as it is. Farmed corals need to go down in price to be competative with wild colonies, not increased through middlemen.
A more appealing situation would be for regional large scale farms to 'accept' growout stock from the 'little' farms at a % less than what they would sell to retailers. This may not be the ideal situation for the basement growers, but it at least would give them an assured outlet for their product. Plus, it would free up a large scale farm's need to produce certain corals and consentrate on more desirable colonies. If they have 4 mini-farmers producing 200 frags of Sarcophyton trocheliophorum on a regular basis, thats time and energy better spent towards growing out acropora for instance.
Just my thoughts.
The basic premise was that there was one portal with frags from a large number of growers. The buyer could order seemlessly from a large list of frags, and orders were sent out to all the farmers with stock on hand.
Shipping time to get from point A to B to Buyer was lengthy and costly. I have no idea what the mortality rate was, but I"ll bet it was pretty high.
A second attempt was done to consolidate farmers in certain areas and have them group up shipping straight to the buyer without the middle man. Still didn't work.
I think what would need to happen to make this kind of idea work is that the farmers basically would be industrial farms for a large wholesaler, who would then sell directly to retailers in mass stock. They would hold frags in their own tanks until they got a big request from LFS's. Not nessisarily growing them, just holding them.
This of course adds $$$ to the final cost of the aquafrags, which I think is the major drawback as it is. Farmed corals need to go down in price to be competative with wild colonies, not increased through middlemen.
A more appealing situation would be for regional large scale farms to 'accept' growout stock from the 'little' farms at a % less than what they would sell to retailers. This may not be the ideal situation for the basement growers, but it at least would give them an assured outlet for their product. Plus, it would free up a large scale farm's need to produce certain corals and consentrate on more desirable colonies. If they have 4 mini-farmers producing 200 frags of Sarcophyton trocheliophorum on a regular basis, thats time and energy better spent towards growing out acropora for instance.
Just my thoughts.
Exotic Reef's has been around for a few years, and is starting to thrive again. John's farmers all send him the stuff, and he tanks it/shots in for the site, in one place.
It's a bit sparse right now due to vacations, but usually he has exotic frags from many sources from all over the country.
It's a bit sparse right now due to vacations, but usually he has exotic frags from many sources from all over the country.
