Considerations before investing in Fish Farming (Aquaculture)

Starting aquaculture as an economic enterprise, like any other economic enterprise, should be taken seriously. One needs to acknowledge that it involves making a significant investment decision and requires serious commitment. This is always true when deciding on the feasibility of any economic investment.

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Thorough prior planning is therefore a must before any investment is made. Planning involves a detailed evaluation of the biological, economic, and socio-legal feasibility of production. Remember that economic considerations are as important as biological considerations in aquaculture. Socio-legal issues are potentially capable of limiting or even making it completely impossible to undertake aquaculture production.

It is essential to ascertain that the business concept is sound. Ask whether:

  • There are adequate and profitable markets for proposed product(s)
  • You have a suitable site for the proposed production
  • You have enough resources to meet the projected targets
  • The financial projections are realistic, robust and consistent
  • You have the expertise to produce
  • There are adequate essential support services
  • Your proposed undertaking meets all the environmental, social and legal requirements

These should be answered in a well thought out BUSINESS PLAN and will provide you with a written document to serve as a blueprint for future reference for your operations.

Business planning

Business planning is important to both new and established aquaculture enterprises. It enhances the chances for success and helps avoid costly mistakes. This plan will be helpful when looking for financiers, because many financial institutes require a formal business plan. A business plan should be a working document that is reviewed and updated at least on yearly basis. Importance of business planning:

  • Many potential and existing fish farmers have difficulty obtaining financing
  • Potential financiers may not be familiar with aquaculture as a viable investment
  • Proper planning for the business will help avoid mistakes
  • Proper planning for the business can also minimize risks associated with the market, production and financing

A business plan is an analysis of the production, market and financial aspects of the proposed enterprise. It consists of:

  • Description of the proposed production site (see pond construction)
  • A Marketing plan/strategy
  • Description of production techniques/strategy
  • Financial analysis of the proposed venture.

 

Marketing plan

Where will I sell my fish? Surprisingly this question is asked very often by very many producers deep into their production cycle. Others ask this question after they have harvested their fish. Serious producers should ask and get answers to this question well before they go into production.

Marketing is normally overlooked by many entrepreneurs and yet aquaculture production, like any other serious investment, should target specific market(s). Indeed for any aquaculture enterprise to be successful, it must target a specified market or markets.
Any serious entrepreneur will produce goods which match the needs and wants of the customers they wish to serve. Therefore, one must make a decision on what to produce based on what the market wants.
Therefore, to avoid uncertainties and eminent failure, the first questions that an investor must ask and get answers to, are:
  • What products does the market demand?
  • What quantities does the market demand?
  • What production resources do I have?
  • Can the resources meet the proposed production?
  • Which products am I capable of producing?
  • What quantities can I realistically supply?
  • When does the market want them supplied?
  • What quality does the market require?
  • Can I meet these standards?
  • Is it possible to get a bulk buyer?
  • Does the demand in the market justify the intended production?
  • What prices is the market ready to pay?
  • Is it cost effective to produce at the offered prices?
  • What competition exists in this field and how do I deal with it?
  • Are the existing physical infrastructure (roads, power telecommunication etc) sufficient to meet the marketing needs for the produce?

After answering these, the entrepreneur should be able to make a decision on whether to continue or abandon the proposed production. If the entrepreneur decides to go on, then, it is time to develop a marketing strategy.

Marketing strategy

A marketing strategy is a plan to achieve the financial goals of the entrepreneur. The strategy should address; the products, product prices, advertisement and where to sell as regards marketing. Ideally, the products must be sold for more than the production cost and quantities that allow the producer to make gains and remain in business.

Marketing strategy involves:
i. Analyzing the market situation
ii. Formulating marketing goals
iii. Evaluating and selecting suitable marketing alternatives

i. Analyzing market situation
To do this, the entrepreneur should have a good knowledge of:

  • Potential customer
  • Modes of marketing (e.g. do you need to draw agreements, do you have to go through brokers etc)
  • Product prices and their seasonality
  • Product forms acceptable by the market
  • Product quality requirements including regulation governing this
  • Consumer preferences
  • Quantity requirements
  • Modes of payments and frequency
  • All costs involved
  • All competing products
  • Alternative markets
  • History regarding prices, demand, supply, product spoilage, product rejection etc

ii. Marketing goals
The goals must be realistic and achievable; otherwise the producer will be groping in darkness without purpose. In formulating marketing goals, the producer must ask, and be able to answer, the following:

  • What is the targeted production?
  • Is this achievable?
  • What is the size of the target market in terms of geographical extent and consumer number?
  • Is it possible to reach this market?

iii. Marketing alternatives

It is important to consider marketing alternatives to avoid disappointment where a target markets collapse. For the marketing alternatives chosen or considered, product volumes and size preferences, costs associated with the marketing, and relevant legislations should be considered very carefully. Alternative markets for aquaculture products to consider include:
  • Hotels, restaurants, retail markets and fish (sea food) shops including supermarkets: This could be out of reach of most small scale producers because they might not meet the frequency and quantity requirement of such outlets. However they can easily over come this by forming marketing groups.
  • Farm Gate Sales: Where local demand for fish is high, this offers a very good option. It removes the problems associated with taking the produce to distant markets. However it necessitates for proper storage facilities like deep freezers or cold rooms and some degree of processing and packaging.
  • Sales to whole sellers, fish processors and large institutions: The advantage here is that large quantities can be disposed off at once and terms of supply and payment are normally stipulated in a legal contract. But this is only suitable for large scale producers.
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