Where can I find info on large scale coral farming?

[Treeman]

Vest,

I would love to know how they keep the water cool in the greenhouse. That is what I am fighting here in FL. GH temps in the high 90's and it drives the water temp into the the mid 80's. It drives me crazy.

[Steven Pro]

Originally posted by anthworks
I have always thought about starting a frag farming business in the Bahama's or some Caribbean island. Buy land on the cost, pump ocean water in the containers. Use natural sun light as much as possible. I guess is would be maricultured frags. Maybe work towards tanks raised reef fish. The only problem was getting the frags and fish back to the states.

You might want to read about how well that worked out for C-Quest. Hint, hurricanes are a real killer. Not to mention, growing corals of Pacific origin in an open system from Caribbean waters is a big no-no.

[Steven Pro]

Originally posted by Eric Boerner
Calfo was the pioneer in Aquaculturing.

Dick Perrin at Tropicorium was doing it for a number of years before Anthony was.

[vest0830]

Originally posted by Steven Pro
You might want to read about how well that worked out for C-Quest. Hint, hurricanes are a real killer. Not to mention, growing corals of Pacific origin in an open system from Caribbean waters is a big no-no.

has to be a build issue. We are in Okinawa Japan a.k.a. typhoon alley. Just had one go through last weekend...gusts to around 120mph and that was weak. Some business' didnt even close. Typhoons come through all the time and it doesnt seem to be a problem here. I believe its a 100% construction issue in the states and elsewhere. IMO places like FL that gets devistated every year due to hurricanes could be greatly reduced after seeing the way places like Okinawa is built.

Treeman, I would love to know the same. It boggles me. Their tanks were probably 24-30" deep with the specimins close to the bottom. THey even had quite a bit of coral suspension going on. If I had to guess, it was probably 90-95 degrees in the greenhouse. For them to run a chiller on a tank of that scale, it would require lots of energy which in turn would be no profits (electricity is expensive on an island). I have no idea how they do it. I will look more into it when I go back down there. I will also pick their brains if I end up doing the internship...which will probably happen by the end of the summer.

Eric, I believe CITES will most likely be putting a restriction on the coral imporation issues sooner or later. -if Fiji has any culture background like the Japaneese do, the moving of livestock will be comming to and end or slowing rather. The japaneese believe their reefs save them from the typhoons, and create a break in the waves/oceans furthur out before the swells hit the beaches thus saving them from the water damage/tsunaumis. (if that made any sense). -yet another reason you probably dont have many corals shipped in from Japan/Okiawa. The reefs I have personally seen in the 3months I have been snorkeling every weekend, I believe there is more than enough coral to be fragged and/or sold. -thats from snorkeling alone...not even diving, and I haven't hit the more difficult spots. So to worry about coral farming in the long term...I believe it will get better for the farmers, personally.

[raaden]

Very Nice thread all,

Couple of thoughts:

1. Can anyone elaborate on why the industry is so cut-throat. I don't want to belabor the point in this thread as it makes more sense elsewhere, but since it was broken, just take a minute and think about it realistically and without any preconcieved notions, and try to come up with a good reason because I would like to know before I get into but I can't come up with one and the business people I've talked to (SCORE, SBA, Private Leaders) can't either. There is a never enough coral available in the stores or online (that I can find), restrictions are getting more and more stringent (Cites this year looks like it wants to start with moratoriums and limits), and store owners are becoming more aware of the benefits of AC stock (several large online stores now have entire sections of AC). Realistically this "cut-throat" vision of the business is hard to understand if you step away from the hoard mentality and think about it entreprenurealy (?word?).
This is not to say that anyone could do itor that large scale business would be easy, I have been fighting with commercial and government entities which will not supply me with credit or with permits to get what I need becuase this business doesn't really exist or doesn't fit into a category they understand. But does that mean it can't be done... hardly. I for one am hoping that 50-100 true "facilities" pop up within the next couple of years. My business plan and concept demands it and I think that the industry as a whole will benefit from it (except maybe those few businesses that that refuse to .
[Steps down from the soapbox]

2. Treeman, Rick, anyone
How are you all doing maintaining temps in the summer. I am working on verifying my numbers and I have run into a huge problem. I have seriously underestimated cooling from evap pads. I can't see how the evap pads are going to be able to keep up with days that reach 94+ especially if there is any humidity already in the air. But I have not seen any of you talk about using HVAC systems (Rick mentioned it as an option, Hamburglar was considering it) to cool.
The guy I have scaling my greenhouse pointed out a couple of things that I was wrong about(evap from the tanks keeping them cool, water walls), and now it seems that from mid Jun - mid Sept I will need some supplemental cooling. Have you guys seen this is in practice or could 600 gals in a tank keep its temp stable moreso than I can calculate.

[Steven Pro]

1.) This business is just like any other out there. There is competition and there will always be competition. I don't think it is any more or less cut throat than anything else.

Part of why people have a hard time is they don't do a full business plan. Many are also too small (basement operations mostly) to be taken seriously by large suppliers. It is far easier for a wholesale operator to deal with a dozen collecting stations or exporters versus a hundred or more small hobby farms. Also, most of the hobby farms price themselves out of the market.

It is a shame that most ventures into this industry begin with coral farming. It is too bad more don't start at their LFS or some other aspect of the industry at large to get a better feel for the market as well as make valuable business contacts.

2.) This depends in large part on where you are in the country. Anthony's place in Pittsburgh worked as has Dick Perrin's Tropicorium which is near Detroit.

[Eric Boerner]

Originally posted by raaden
1. Can anyone elaborate on why the industry is so cut-throat.

Ok, so theres 3 things to mull-over as to why its so cut throat.

1. Like any other business where competition is strong, you have to deal with people who feel that YOU are interfering in their ability to make a livelihood. So... consider this. There is the small fish, the guy who frags a dozen pieces out of his aquarium once a month that tries to get store credit, or trade at frag swaps. They pratically 'give away' their prunings.

Then theres the medium size fish that is actually trying to do a basement prop system (this is where I was at). The volume of frags averages around 50 a month. These people usually sell to a closed market within their local area or on the internet. Stores wont buy from them, since their costs have to be at the same if not more than what a LFS can get wild colonies for. Throw about a dozen of these into a very small community, and you'll see them tear at each other frequently like damsels in a 5 gallon tank.

Finally, you have the monster fishes, who have serious cash to throw at a ful blown production facilities. They can turn over enough frags in a month to sell to 200 LFS's at a cost they can make a margin at. They don't compete, because they have the market.

2. So those were the 'legitimate' aquaculturing people. Now throw into the mix what I like to call 'the scabs'.... People who hang out at the wholesalers and snag every sweet looking coral that gets trasn-shipped here, and then cuts it up into 20 'frags' and tries to pawn it off as their own aquacultured frags. They get 20 frags @ $2 each, and sell them off to locals and the internet for $20 a pop. Incredible profit with no real need to have a large facility. As long as the turnover is fast, they don't need to worry about space. I despise these types of people. Very dishonest. They tend to be the most spiteful and hateful group at frag swaps too. I saw a fair share of them when I lived in So Cal... Unfortunately.

3. The LFS's can be a major pain... LFS's can be the biggest pain in the arses in this business for many reasons....

Most LFS owners think they are the king's of the community. Most tend to have a god complex and feel that you should respect them for even talking with you. This makes trying to deal with them extremely difficult, especially when they employ a number of ways to inhibit you from selling you stock to either them, or their customers. For instance:

Alot of LFS's are now in the business of tank servicing. I have spoken with numerous LFS about supplying them regularly with highly desirable colonies. 3/4 of the LFS's will reply, "why should I buy frags from you, when I get them for free from my service customers?" So not only do they charge their service customers to come out to their tanks, but their contracts specifically state that any pruning that is done in the tank becomes property of the LFS....

Many LFS's are also getting into the habit of small scale fragging operations. Some will actually do broodstocks, but many will go the scab route too on highly colorful colonies they get in...

Wild verses Aqua.... This will remain the biggest problem for growers. It simply is just too cost effective for an LFS to get in a crate of corals from a wholesaler than it is to buy aquas from a farmer. The only exception is the LE frags that come from places like ORA. People want ORA frags, so LFS's are now forced to buy them... If the consumer (us) all demanded aqua frags instead of wild ones, the opinion of LFS would change. But... the consumer is still more concerned about getting big colonies, bright colors, at a cheap price. That just cannot be done with aquaculture...

2. How are you all doing maintaining temps in the summer.

All of the mass production facilities that seem to do really well are all in the northern hemisphere (with the exception of ORA). Its easier to heat water than it is to cool it down. Just make sure power is fairly cheap where you decide to set up shop for supplimental lighting.

If I were to do a start up largescale facility, I would look at being close to the sea, a cheap energy state, that doesn't overheat during the summer. That would land me in.... Seattle!

Yup, If I had $250k to throw out the window to try and set up a large scale facility, I would set up a warehouse near SeaTac, right on the waterfront. Scrub and sterilze the harbor water. Put in skylighting with 400 watt halides over 24+ raceways. Being close to SeaTac, I could have very fast ship outs. If I was a ruthless business person, rather than a conservationist, I would also *****-ship coral and live rock in from Fiji/Tonga/Solomans through Korean Air.

But thats just my take on it.

[ctenophore]

Regarding the temp control issues, I've gone through the same analysis you guys are currently doing. I decided on Aqualogic Titan heat pumps FWIW. Evap cooling is not consistent, and geothermal is too expensive and troublesome, at least in FL. Do a real cost/benefit analysis and you'll probably find the same thing. I also looked at water-source heat pumps, but decided that their cost premium in addition to the new well and permits required wouldn't give a real ROI for many years.

I have considered the nested tanks idea that has been mentioned in this forum before, but that will need some experimentation. I plan on prototyping something like this eventually. My fiberglass builder can make anything

Regarding the nature of the business, at least for facility design and implementation, my business partners and I have spent a lot of time doing a lot of math and engineering, and what I feel is some significant innovation. That gives us a competitive advantage that I can't just hand out to everyone that comes along. I'd love to share tips and tricks with others, but only if I can be sure to get something in return. As a startup business, my IP (intellectual property) is what makes me competitive with the big boys who have $$tons to throw at a new business.

I have thought about starting a private, invite-only mailing list or forum for those of us doing large scale facilities (large scale=1000+ sqft of water). I'm not sure if anyone who has a lot of money invested in their facility would even want to participate in it though for the reasons mentioned above.

There was talk of starting a co-op type organization for a group of FL coral growers, but I haven't heard anything about it for a while. It's a good idea, but each member needs to bring something valuable to the table.

So, as the title of this thread asks, "Where can I find info on large scale coral farming?" I think the answer is to either find some sort of information-sharing group, or be prepared to read a lot of books and do a lot of homework. There simply isn't a book on how to successfully build a large scale coral farm, and probably won't be for a long time. Calfo's book only scratches the surface, and some of it is already obsolete.

[Treeman]

ctenophore,

I agree with you on this. Its amazing how many emails I get wanting to come over and "check" my systems out. I have to politely say no. And they mention, kinda after the fact that they would buy stuff from me too. Like that will make me let em in.

Give me a call when you can. The co-op idea is still there. It has just changed a little. I sent you my phone number if you got my email. I would love to discuss it with you and our ideas.

Matt

[raaden]

I think I should have prefaced my thoughts in my first post, but Steven and ctenophore got it right on. Steven in his description of the current entities and ctenophore in his description of the intellectual property. Fortunately, I think both of these are the ideals that we can overcome and innovate past to make this doable from an industry perspective.

From the research I have done it seems to be that either people are scared of having to take on the more established importers, or are not willing to put the time, effort and capital investment into what a business of this nature would require. I partially agree with starting at the LFS level. The part about making contacts is absolutely vital if you want to be a large force in the market, just as it would be with any business. As far as starting at the LFS level that is just the easiest place to make these contacts. The problem is that for those that are working at the LFS level it would be far to big of a jump to get into "farming" as a direct business transfer, and there is no easy way to make the transition. I have witnessed stores try with extra tanks in the back of the store only to find they were spending more on equipment and other expenses than what they were selling the frags for. It almost seems like a catch 22 in principle especially if you don't come at it from a business perspective. The reason I think why most start with hobby farms is that it is the most direct way to have the hobby pay for itself. I don't think that most stay in it thinking they will make a living from it, but more to make the hobby pay for itself and have some "leftover money", if there is an intention of making serious money this is but an intermediate step.

Eric also made a couple very good points about the "medium fish" and LFS's. This is I think the start of my point above, I think this was also my misunderstanding of what I foresaw in the larger market. I was one of the medium fish for a couple of years as well, and even considered buying a store from someone who was moving out of the area. The problem was I had been working on a plan for a mid-sized farm and some developing concepts. I just couldn't justify the risk/reward (or ROI) potential of the store versus the farm, especially if I am correct in figuring that there is no upgrade path from the store. I think I was applying the concepts of the scabs with the monster fish, and assuming that the same practices existed in both. I agree that the scabs make for very difficult practices and would suggest that they have become even more widespread than the locals and frag swaps. The issue there is that they will never have the quality or consistency that most LFS or internet stores will want if given a realistic alternative.
The most disturbing was the part about the LFS's though. I have seen some of this locally and expected it to be more widespread but not to the extent that Eric speaks of, especially the servicing and scabbing. My only point would be that this doesn't seem to be putting much pressure on the importers so there must still be a market for external(to the LFS) product. Most LFS's that I have seen try indoor farming have realized it is not cost effective for them (I know of three first hand and several more from conversations) and all have since stopped except for those colonies that they can get more than $80 for.

I agree with the comments about the AC colonies and how that affects customer decisions (price, color, size), but I suggest that this is only because that is all the customer has ever known. For the vast majority of customers that have never visited RC(and some that have) the only thing they think about is how much does it cost and how will it look in my tank. Most don't even think about whether it can coexist in the system. This though is where the market is, Customer Education. I'll leave it at that for now but I believe that is the key to why farming has not been more viable. I don't think a farmer can compete with importers at their game, but change the rules and now the game changes as well.

Agreed on the stable water temp sourcing, it is absolutely vital to large scale facilities, but my hope is that a large enough well source can be just as good, given a decent cost on salt and supplements.

ctenophore, I lived in Orlando, Tampa, and Virginia Beach so I would agree with you that in many places, especially coastal areas, groundsourcing is not possible. I would also suggest in some cases (pre-existing well) that a water-source or geothermal heat pump would be an ideal way to lower the most significant issues(climate control stability and costs). In my research equipment ends up being 2.5x as expensive as a gas heater(with pre-existing well) but the cost savings, based on current LP prices, I will recoup in 18 months from heating alone. The bonus is that it can also provide close to adequate cooling in the summertime as well, and this would come for almost free.

On the intellectual and other business idea property issues, this may sound like it is coming from left field, but I offer it as a possible solution to the barriers discussed above, not as criticism of anything posted before.

Firstly; I too have ideas that I have come up with for how to make it as a business. I think that is the whole point of writing a business plan, to solidify, expand and define your ideas and means to run a business. But you seem to be focused on the hoarding of all this potential business. I know that no matter how large my business gets that I cannot supply enough coral to cover the demand even now, let alone once regulation starts to cut into what can be imported. Being a conservationist, but still a business man, I recognize that there will need to be more of "me" out there to make AC products viable both in meeting demand and producing quality. The more there are and the more quality product makes it into the marketplace the more viable AC product becomes as a whole. In turn the more the demand grows. This is what ORA is feeding on right now, as a for instance they have provided to the market a pre-adapted seahorse that even a moderate hobbyist can keep alive for much longer than a wild one. This is fueling the demand for more of the product. Imagine doing this for some of the more difficult to keep corals. Now imagine creating a whole ecosystem of this. No one business, however large, can provide this much product to the marketplace, nor would it be cost effective to try to supply it all from one geographical location.

In any supply industry the "large players", once they get over their egos and realize the market they have, always begin to work together for the greater good of the industry as a whole. It is usually only the retailers and the marketers that fight amongst themselves, and I give this with first hand knowledge having been a product manager in multiple industries. Electronics and small scale software would be the only caveats to that but I think that is because those indutries have no stability and have yet to shake themselves out enough.

Secondly; I for one am planning on putting the size of most people's retirements(mid 6 figures) into a facility, and am very interested in joining not only a mailing list, but much more and am not worried at all about others who are interested as well. Business acumen states that success in business is not so much what you know when you start it's how much you are willing to work and learn along the way. I am sure that Rick Rottet would agree with that. If I were to look for ideal members of a group to be in a group or coop the decision would be more their dedication to the business and their skillset than any proprietary ideas they may have alread come up with. Anthony was right when he put in his book that being able to run a business is just as important as being able to run a tank if you want to be in this industry. The coop idea is starting to get to the point but it seems that most that are serious about this shrug an idea like this off as silly or counter-productive. Ctenophore: what would you consider valuable enough to get a seat at the table? I ask this with serious intentions.

I will completely agree with the entire last paragraph of what ctenophore said. There is alot of homework involved in this, and if you are not willing to do that the basement/garage approach is the best place to put your efforts. I have been at it for about 18 months and have just decided I need another partial rewrite of my business plan, after having just ordered much of the equipment I need, because I want to expand an idea a bit more based on my latest SBA review.

I hope all take this commentary as simply that with the intent to create discussion. I am serious about this and hope to create serious discussion with others to make this viable in the near term.

[vest0830]

Very interesting points brought to the table.

[ctenophore]

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

[Whaledriver]

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.

[Eric Boerner]

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.

[jake levi]

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 ?

[alexinfla]

Tons of wisdom in that last post Jake, nicely put, thanks.

[raaden]

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??

[jake levi]

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

[ctenophore]

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

[Whaledriver]

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.

[raaden]

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 !!

[Treeman]

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.

[vest0830]

Just my next question...I was thinking the other day...has anyone experimented with solar power? That IMO would be a much cheaper way to aleviate the cost's of running lights.

Also, wow. SO much information in this thread!

[ctenophore]

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

[raaden]

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.