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Re: killie profits ... or ... fun with numbers ( warning ==>LONG )
In response to crucible11@aol..com's question,
Robert E wrote (in part)
>> The only person I know of who made a consistent profit
>> off killie breeding was the great John Gonzales of Philly.
>> In the late 50's and early 60's, Gonzales devoted 3 floors
>> of his brownstone type house to commercially raising
>> killies. .....
>> He advertised in the national magazines and sold to
>> stores/individuals all over the country.
(The following would work better in a spreadsheet, but nobody likes people who send attachments to list-servers, so I won't do that.)
Let's assume that Joe or Juanita WannaBeCommercialKillieRaiser has a target annual income (before personal taxes) of $50,000 per year. Some people "need" more than that, some less ... but we gotta start with some number.
And just as a ball-park quick estimate, that annual "variable expenses" for an operation of this scale would be $10,000, which covers food, water, electrical, etc, To keep it simple, for the moment we're going to ignore the necessary start-up capital needed for all kinds of "hardware" that would have a useful life of more than a year, and also ignore any required return on investment on that.
So ... given these very simple assumptions, Joe or Juanita needs to $50k + $10k or $60k of incoming cash flow per year. And if we assume he/she ships fish out five times a week all the time ... that means approximately 250 shipping dates per year. $60k cash flow needed divided by 250 shipping days means Joe/Juanita needs to realize $240 of gross income per day. So far, so good.
One of the "Rules of Manufacturing" (which I'm just making up right now) is "the more units someone buys, the lower a price they will demand." (This is also called the Wal-Mart rule.) So if we assume that Juanita/Joe will sell to both individuals (say via print advertising and AquaBid) and "to the trade" (fish stores), we need to recognize that the price that is realized will be very different depending on who's buying. Let's assume this:
- 75% of sales will be to the trade .. and 25% will be to John Q. Public
- for the wholesale trade sales, an average price of $2 per fish. (Which I think is considerably higher than the Tampa commercial breeders realize, on average, but there's a killie-premium.)
- for sales to individuals, prices will be higher, say those average $5 per fish.
Given that 75:25 sales mix, the AVERAGE price per fish sold will be $2 x 75% + $5 x 25% = $2.75.
Since our wannabe mega-breeder needs $240 of gross income per day, at $2.75 per fish on average, it becomes apparent that she/he will need to package up and ship out 87.27 fish per shipping day ... let's just call that 88. Since we expect a 75:25 mix of sales, 66 of those fish will be going out wholesale to fish stores ... let's say 2 shipments of 33 fish each ... and 22 fish will be to Aqua-Bidders ... say 4 shipments there. (I mention this detail only because Joe/Juanita needs to consider the time it will take every day to pack up those fishlettes for delivery, take them to the P.O., etc., as well as deal with the administrivia of responding to potential customers, following up with real ones, etc.)
So ... we were at 88 fish per shipping day.
If we assume that the average killie will be sold at 4 months of age .. some earlier, some later, no doubt ... then we need about keep about 17 weeks of "work in progress" inventory going all the time. That's 85 shipping days at 88 fish per day, or a total inventory of 7,480 fish.
Now that we know approximately how big our operation has to be, we can estimate how many tanks we're going to need for all that, how much gear and space we'd need to provide fresh food for that quantity of fish, can think about engineering our water and filtration systems, etc etc etc. .... and I am NOT going to do that right now. But ... whatever the amount of capital needed to put together the physical operation turns out to be (including "rental cost" for the building) ... Juanita/Joe will need to recoup the investment in that, and as "capital projects" go, this is a moderately risky venture IMO. So if it were me, I'd need a 20% annual return on that to make it worth while. (The small business lending officer at the local bank might think that's not enough, if Joe or Juanita has to go that route.)
Let's just make up a number for fun ... say $10,000 to set up the physical operation. A 20% ROI would mean that we need $2000 more income per year to fund that ... that's another 2.91 fish per day ... which means another 250 fish in progress.
And of course, once Juanita/Joe bites the bullet and commits to this entrepreneurial opportunity, scrounges up the $10,000, finds a place and gets it all going ... biology being what it is, it's going to take 4 months before there are any fish ready to sell at the output end of the breeding pipeline. During which time there's no income. So ... we have to fund "working capital" for that phase too ... amounting to ...[ cranks up HP-12c calculator ... estimations omitted ] ... that's perhaps another 202 fish per month for the first four years ... or about 9.7 (say 10) per shipping day. (And 850 fish-in-progress to produce the additional required 10 sold per day.)
So ... we started needing 7,480 fish to cover owner's profit and running expenses, added 250 for ROI of capital investment, and another 850 to recoup from the "start-up/pre-sales" phase of operations. Which is 8,580 fishes in-house so far. How much time does it take .. every day ... to keep a "killie fishroom" of that magnitude going??? (I know how much time it takes me to deal with just 20 tanks and perhaps a couple hundred fish ... but admittedly my methods are primitive, I'm just a novice hobbyist working on a small scale.)
What if she needs health insurance ? To fund a retirement plan ? A substantial "rainy day" fund in case some disaster wipes out most of the livestock ? Just keep adding more fishes, more tanks, more gear, ...... and more daily shipments, more water changes, more feeding, more mop checking .... (but not a assistant, because there's no budget for an assistant !!! )
Now ...... what if the assumption of $2/fish to wholesalers turns out to be to optimistic ? What if Joe/Juanita can really only make $1.50 per fish ??? That would mean he/she'd need a 16% bigger operation to cover that, or change the sales mix to favor more (higher margin) fish to private individuals ... which brings up the question, just how big and insatiable is the demand for killies via AquaBid and other sales channels ???
Anyway, I trust I've made my point ... making a living raising killies (or anything comparable) requires a bigger operation than one might think ... and I suspect that the "marketing and sales" part of the business is going to be as critical over the long-haul as the "technical" parts of successfully raising desirable fish in quantity.
Mr/Ms Crucible11, if you're still interested, put your assumptions into a spreadsheet, play around with the numbers, see what kind of conclusions you draw, and whether there is or is not a viable business possibility.
(We'll keep our eyes out for your upcoming flood of fish on AquaBid !!! <g>)
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