How to open a shrimp farm?
Are you keen to open a shrimp farm but don't know where to begin? Then you're in luck because this guide will lead you through all the steps required to check if your business idea can be profitable and, if so, turn it into a reality.
Our guide is for prospective entrepreneurs who are thinking about starting a shrimp farm no matter how far they are in their journey - whether you’re just thinking about it or in the middle of market research this guide will be useful to you.
Think of this as your blueprint: we cover everything you need to know about opening a shrimp farm and what key decisions you’ll need to make along the way.
Ready? Let’s get started!
What is the business model of a shrimp farm?
Before thinking about starting a shrimp farm, you'll need to have a solid understanding of its business model (how it generates profits) and how the business operates on a daily basis.
Doing so will help you decide whether or not this is the right business idea for you, given your skillset, personal savings, and lifestyle choices.
Looking at the business model in detail will also enable you to form an initial view of the potential for growth and profitability, and to check that it matches your level of ambition.
The easiest ways to acquire insights into how a shrimp farm works are to:
- Speak with shrimp farm owners
- Undertake work experience with a successful shrimp farm
- Participate in a training course
Speak with shrimp farm owners
Talking to seasoned entrepreneurs who have also set up a shrimp farm will enable you to gain practical advice based on their experience and hindsight.
Learning from others' mistakes not only saves you time and money, but also enhances the likelihood of your venture becoming a financial success.
Undertake work experience with a successful shrimp farm
Gaining hands-on experience in a shrimp farm provides insights into the day-to-day operations, and challenges specific to the activity.
This firsthand knowledge is crucial for effective planning and management if you decide to start your own shrimp farm.
You'll also realise if the working hours suit your lifestyle. For many entrepreneurs, this can be a "make or break" situation, especially if they have children to look after.
First-hand experience will not only ensure that this is the right business opportunity for you, but will also enable you to meet valuable contacts and gain a better understanding of customer expectations and key success factors which will likely prove advantageous when launching your own shrimp farm.
Participate in a training course
Undertaking training within your chosen industry is another way to get a feel for how a shrimp farm works before deciding to pursue a new venture.
Whichever approach you go for to gain insights before starting your shrimp farm, make sure you familiarise yourself with:
- The expertise needed to run the business successfully (do you have the skills required?)
- How a week of running a shrimp farm might look like (does this fit with your personal situation?)
- The potential turnover of your shrimp farm and long-term growth prospects (does this match your ambition?)
- The likely course of action if you decide to sell the company or retire (it's never too early to consider your exit)
At the end of this stage, you should be able to decide whether opening a shrimp farm is the right business idea for you given your current personal situation (skills, desires, money, family, etc.).
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Assembling your shrimp farm's founding team
The next step to opening your shrimp farm is to think about the ideal founding team, or to decide to go in alone.
Starting and growing a successful business doesn't have to be a solo journey and setting up a shrimp farm with several co-founders is generally easier. The business benefits from a management team with a wider skillset, decisions are made together, and the financial risk is shared among the partners, making the journey more collaborative and less daunting.
But, running a business with several partners brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your own business.
We won't go into too much detail here, as this is a complex topic that deserves its own guide, but we do recommend that you ask yourself the following questions:
- What is the ideal number of co-founders for this venture?
- Are you on the same wavelength as your potential partners in terms of vision and ambition?
- How will you deal with potential failure?
Let's look at each of these questions in more detail.
What is the ideal number of co-founders for this venture?
To answer this question you will need to consider the following:
- What skills do you need to run the business? Are you lacking any?
- How much startup capital do you need? How much do you have?
- How are key decisions going to be made? - It is usually advisable to have an odd number of partners (or a majority shareholder) to help break the tie.
Put simply, your co-founders contribute skills, capital, or both. Increasing the number of partners becomes advantageous when there is a deficiency in either of these resources.
Are you on the same wavelength as your potential partners in terms of vision and ambition?
Your business partners should share the same short and long-term vision, be it business expansion or social responsibility, to avoid future frustrations and simplify decision-making. Different views are natural, but alignment is ideal.
In any case, you should think of having an exit mechanism in place in case one of the partners wants to move on.
How will you deal with potential failure?
We wish you nothing but success when starting up and growing your shrimp farm, but it's always wise to have a backup in case things don't go as planned.
How you deal with a potential failure can vary significantly based on the relationship you have with your business partner (close friend, spouse, ex-colleague, etc.) and the personal circumstances of each of you.
For instance, starting a business with your spouse might seem appealing, but if it doesn't succeed, you risk losing 100% of the household income at once, which could be stressful.
Similarly, going into a partnership with a friend can put pressure on the friendship in the event of failure or when you need to make difficult decisions.
There is no wrong answer, but it is essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.
Is there room for another shrimp farm on the market?
The next step in starting a shrimp farm is to undertake market research. Now, let's delve into what this entails.
The objectives of market research
The goal here is straightforward: evaluate the demand for your business and determine if there's an opportunity to be seized.
One of the key points of your market analysis will be to ensure that the market is not saturated by competing offers.
The market research to open your shrimp farm will also help you to define a concept and market positioning likely to appeal to your target clientele.
Finally, your analysis will provide you with the data you need to assess the revenue potential of your future business.
Let's take a look at how to carry out your market research.
Evaluating key trends in the sector
Market research for a shrimp farm usually begins with an analysis of the sector in order to develop a solid understanding of its key players, and recent trends.
Assessing the demand
After the sector analysis comes demand analysis. Demand for a shrimp farm refers to customers likely to consume the products and services offered by your company or its competitors.
Looking at the demand will enable you to gain insights into the desires and needs expressed by your future customers and their observed purchasing habits.
To be relevant, your demand analysis must be targeted to the geographic area(s) served by your company.
Your demand analysis should highlight the following points:
- Who buys the type of products and services you sell?
- How many potential customers are there in the geographical area(s) targeted by your company?
- What are their needs and expectations?
- What are their purchasing habits?
- How much do they spend on average?
- What are the main customer segments and their characteristics?
- How to communicate and promote the company's offer to reach each segment?
Analyzing demand helps pinpoint customer segments your shrimp farm could target and determines the products or services that will meet their expectations.
Assessing the supply
Once you have a clear vision of who your potential customers are and what they want, the next step is to look at your competitors.
Amongst other things, you’ll need to ask yourself:
- What brands are competing directly/indirectly against your shrimp farm?
- How many competitors are there in the market?
- Where are they located in relation to your company's location?
- What will be the balance of power between you and your competitors?
- What types of services and products do they offer? At what price?
- Are they targeting the same customers as you?
- How do they promote themselves?
- Which concepts seem to appeal most to customers?
- Which competitors seem to be doing best?
The aim of your competitive analysis will be to identify who is likely to overshadow you, and to find a way to differentiate yourself (more on this see below).
Regulations
Market research is also an opportunity to look at the regulations and conditions required to do business.
Ask yourself the following questions:
- Do you need a special degree to open a shrimp farm?
- Are there necessary licences or permits?
- What are the main laws applicable to your future business?
At this stage, your analysis of the regulations should be carried out at a high level, to familiarize yourself with any rules and procedures, and above all to ensure that you meet the necessary conditions for carrying out the activity before going any further.
You will have the opportunity to come back to the regulation afterwards with your lawyer when your project is at a more advanced stage.
Take stock of the lessons learned from your market analysis
Market research should give you a definitive idea of your business idea's chances of commercial success.
Ideally, the conclusion is that there is a market opportunity because one or more customer segments are currently underserved by the competition.
On the other hand, the conclusion may be that the market is already taken. In this case, don't panic: the first piece of good news is that you're not going to spend several years working hard on a project that has no chance of succeeding. The second is that there's no shortage of ideas out there: at The Business Plan Shop, we've identified over 1,300 business start-up ideas, so you're bound to find something that will work.
Need a convincing business plan?
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How should I position my shrimp farm on the market?
The next step to start your shrimp farm is to define precisely the market positioning your company will adopt in order to capitalise on the opportunity identified during your market research.
Market positioning refers to the place your product and service offering occupies in customers' minds and how they differ from the competition. Being perceived as a low-cost solution, for example.
To find a concept and a market positioning that will resonate with your customers, you need to address the following issues:
- How can you differentiate yourself from your competitors?
- Is it better to start or buy a shrimp farm already in operation?
- How will you validate your concept and market positioning before investing in the business?
Let's look at these aspects in more detail.
How can you differentiate yourself from your competitors?
Opening a shrimp farm means starting with a major disadvantage compared with competitors already active on the market.
While you will have to create everything from scratch, your competitors already have everything in place.
Your competitors' teams know the business well, whereas yours has only just been recruited, their customers are loyal and they benefit from word of mouth that you don't yet have.
So you're going to need a solid plan to succeed in taking market share from your competitors and making your mark.
There are a number of aspects to consider in order to try to avoid direct confrontation if possible:
- Can you target a different customer base than your competitors?
- Can you offer products or services that are different from or complementary to what your competitors already sell?
- How will your competitors react to your shrimp farm entering their market?
- Can you build a sustainable competitive advantage that will enable you to compete with your current and future competitors?
Is it better to start or buy a shrimp farm already in operation?
The alternative to setting up a new independent business is to buy out and take over a shrimp farm already in operation.
A takeover is a good way of reducing the risk of your project compared with a pure start-up.
Taking over a business has two enormous advantages over setting up a new one: you start out on an equal footing with your competitors since you take over the team and the customer base, and you don't increase the supply on the market enabling you to maintain the existing balance on the market where the business operates.
However, the capital requirements for a takeover are higher because the business will have to be bought from its previous owners.
How will you validate your concept and market positioning before investing in the business?
However you decide to set up your business, you will need to ensure that there is a good fit between what you sell and what customers are looking to buy.
To do this, you'll need to meet your target customers to present your products or services and check that they meet their expectations.
Deciding where to base your shrimp farm
The next step to opening a shrimp farm is deciding where you want to set up your business.
Choosing the right location for your business is like finding the perfect stage for a play. Without it, your business may lack the spotlight it deserves.
Whilst there is no “perfect” location for your shrimp farm, one that meets as many of the following factors as possible could be ideal:
- Visibility and foot traffic - A shrimp farm requires a constant flow of customers to purchase their products, thus a location with high visibility and foot traffic would be ideal.
- Parking space, road and public transport accessibility - Customers need a convenient and easy way to access the farm, whether by car or public transport.
- Proximity to target customers - A shrimp farm would benefit from being located near areas with a high demand for seafood products, such as coastal cities or tourist destinations.
- Climate and soil quality - Shrimp farms thrive in warm, tropical climates with access to clean, nutrient-rich water. It is important to have a suitable location with the right climate and soil conditions for successful shrimp farming.
This list is obviously not exhaustive and will have to be adapted to the particularities of your project.
Once you’ve considered the factors above, it’s important to think about the budget that your startup has at its disposal. You’ll need to find a location that meets your business requirements but is affordable enough, especially short-term.
If you opt for renting instead of buying your premises, make sure to take into account the terms of the lease, including aspects such as the duration, rent increase, renewal, and so on.
The lease contractual terms vary greatly from country to country, so be sure to check the terms applicable to your situation and have your lease reviewed by your lawyer before signing.
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Decide on a legal form for your shrimp farm
The next step to start a shrimp farm is to think about the legal structure of your business.
The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.
Choosing a legal structure for your shrimp farm is an important decision because this will affect your level of risk, how business decisions are made, your level of taxation, what sources of financing are available, and the level of red tape, amongst other things.
Your level of risk, as a business owner, will depend on whether your business's structure has a legal personality and limited liability.
- Legal personality, also called corporate personality, signifies that your business has a legal entity which is separate from the owners and the people running it. In simple terms, if something goes wrong and a competitor or customer wants to sue, with a corporate personality the business gets sued, whereas without it is the entrepreneur personally.
- Limited liability limits the maximum you can lose if the business fails to what you invested. Your personal assets are not at risk. However, not all structures have a limited liability, legal forms with an unlimited liability expose your personal assets (for example, your creditors might try to go after your house if the business incurs debts and then goes under without being able to repay what it owed).
How business decisions are made will also depend on the legal form you choose for your shrimp farm, and so is the amount of paperwork and red tape: do you need to hold general assemblies, to produce annual accounts, to get the accounts audited, etc.
The way you set up your business legally will also impact your taxes and social contributions, both at a personal level (how much your income is taxed) and at the business level (how much the business's profits are taxed).
Finally, the legal form also influences what sources of financing are available to you. Raising capital from investors requires having a company set up, and they will expect limited liability and corporate personality.
It's important to note that the actual legal structures for businesses vary slightly from country to country. But deciding on the legal structure is usually quite straightforward once you know how many co-founders you'll have, whether you'll have employees, and the expected revenues for the business.
Also note that a good business idea will be viable whatever the legal form you choose. How businesses are taxed changes every year, therefore one cannot rely on specific tax benefits tied to a particular structure when deciding to go into business.
One easy way to proceed is to assume you're going with the legal form used by your closest competitors, and to validate this assumption with a lawyer and an accountant once your idea is mature and you're prepared to formally register the business.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
How much money do I need to start a shrimp farm?
To answer this key question, we first need to look at the resources you'll need to launch your shrimp farm and keep it running on a daily basis. Let's take a look at what that entails.
Since each venture is distinct, providing an average budget for starting a shrimp farm is impossible.
We strongly advise careful consideration when reading estimates on the web. It’s best to ask yourself the following questions:
- Is my project similar (location, concept, planned size, etc.)?
- Can I trust where this information is coming from?
- Is the data fresh or stale?
Your thinking behind the investments and human resources required to launch and operate the business will then enable you to cost each item and include them in your financial forecast (which we'll look at later in this guide).
Once complete, the forecast will give you a precise idea of the initial investment required and profitability potential for your business idea.
Startup costs and investments to start a shrimp farm
Let's start with the investments. To set up a shrimp farm, initial working capital and investments can include the following items:
- Pond construction and preparation: This includes the cost of digging and preparing the ponds for shrimp farming, as well as any necessary equipment such as pumps and aerators.
- Hatchery setup: If you plan to hatch your own shrimp, you will need to invest in a hatchery setup, which includes tanks, filters, and other equipment for raising shrimp larvae.
- Feed and feeding equipment: Shrimp require a specialized diet, so you will need to budget for the cost of feed as well as any feeding equipment such as automatic feeders.
- Harvesting and processing equipment: Once your shrimp are ready to be harvested, you will need equipment such as nets, sorting tables, and processing equipment to properly handle and prepare them for sale.
- Infrastructure and utilities: You may also need to invest in infrastructure for your farm, such as roads, fencing, and utilities such as electricity and water supply.
Of course, you will need to adapt this list to your company's specific needs.
Staffing requirements to operate a shrimp farm
You'll also need to think about the staff required to run the business on a day-to-day basis.
The human resources required will vary according to the size of your company.
Once again, this list is only indicative and will need to be adjusted according to the specifics of your shrimp farm.
Operating expenses of a shrimp farm
The final point to consider when analyzing the resources required is the question of operating costs.
Operating expenses for a shrimp farm may include:
- Staff costs: This includes salaries, benefits, and training for all employees involved in the day-to-day operations of the shrimp farm.
- Accountancy fees: You will need to hire an accountant to manage your financial records, prepare tax returns, and provide financial advice for your shrimp farm.
- Insurance costs: To protect your shrimp farm from unforeseen events, you will need to pay for insurance coverage for your property, equipment, and employees.
- Software licences: In order to manage your operations efficiently, you may need to purchase software licences for programs such as accounting software, inventory management, and data analysis.
- Banking fees: You will incur charges for various banking services such as depositing checks, making wire transfers, and managing your business accounts.
- Feed costs: Shrimp feed is a major expense for a shrimp farm. You will need to purchase high-quality feed to ensure the health and growth of your shrimp.
- Water and electricity: As a shrimp farm requires a large amount of water and electricity for operations, you will need to budget for these utility costs.
- Laboratory testing: It is important to regularly test the water quality and health of your shrimp, which will incur costs for laboratory testing services.
- Pond maintenance: Regular maintenance of your shrimp ponds, including cleaning and repairing, will be necessary to ensure optimal conditions for your shrimp.
- Transportation costs: You may need to transport your shrimp to market or to other facilities, which will involve expenses for fuel, vehicles, and shipping containers.
- Marketing and advertising: To attract customers and promote your shrimp farm, you may need to invest in marketing and advertising efforts, such as creating a website or attending trade shows.
- Permits and licenses: You will need to obtain various permits and licenses to operate your shrimp farm, which may involve fees and renewal costs.
- Consulting fees: You may need to hire consultants for specialized services such as environmental assessments, legal advice, or technical support.
- Packaging materials: If you plan to sell your shrimp directly to consumers, you will need to budget for packaging materials such as labels, bags, and boxes.
- Office supplies: You will need basic office supplies for your administrative tasks, such as paper, pens, and printer ink.
Here also, this list will need to be tailored to the specifics of your shrimp farm but should be a good starting point for your budget.
How will I promote my shrimp farm's?
The next step to starting a shrimp farm is to think about strategies that will help you attract and retain clients.
Consider the following questions:
- How will you attract as many customers as possible?
- How will you build customer loyalty?
- Who will be responsible for advertising and promotion? What budget can be allocated to these activities?
- How many sales and how much revenue can that generate?
Once again, the resources required will depend on your ambitions and the size of your company. But you could potentially action the initiatives below.
Your shrimp farm's sales plan will also be affected by variations in consumer demand, like changes in activity during peak holiday seasons, and the dynamics within your competitive environment.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
Building your shrimp farm's financial forecast
The next step to opening a shrimp farm is to create your financial forecast.
What is a shrimp farm financial forecast?
A shrimp farm financial forecast is a forward-looking tool that projects the financial performance of your business over a specific period (usually 3 years for start-ups).
A forecast looks at your business finances in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
Building a financial forecast enables you to determine the precise amount of initial financing required to start your shrimp farm.
There are many promising business ideas but very few are actually viable and making a financial forecast is the only way to ensure that your project holds up economically and financially.
Your financial forecast will also be part of your overall business plan (which we will detail in a later step), which is the document you will need to secure financing.
Financial forecasts are used to drive your shrimp farm and make key decisions, both in the pre and post-launch phases:
- Should we go ahead with the business or scrap the idea?
- Should we hire staff or use an external service provider?
- Which development project offers the best growth prospects?
- Etc.
Creating a financial forecast for starting a shrimp farm is an iterative process as you will need to refine your numbers as your business idea matures.
As your shrimp farm grows, your forecasts will become more accurate. You will also need to test different scenarios to ensure that your business model holds true even if economic conditions deteriorate (lower sales than expected, difficulties in recruiting, sudden cost increases or equipment failure problems, for example).
Once you’ve launched your business, it will also be important to regularly compare your accounting data to your financial projections in order to keep your forecast up-to-date and maintain visibility on future cash flows.
What does a financial projection look like?
Your shrimp farm forecast will be presented using the following financial tables.
The projected P&L statement
The projected P&L statement for a shrimp farm shows how much revenue and profits your business is expected to generate in the future.
The projected balance sheet of your shrimp farm
Your shrimp farm's projected balance sheet provides a snapshot of your business’s financial position at year-end.
The cash flow forecast
A projected cash flow statement for a shrimp farm is used to show how much cash the business is expected to consume or generate in the years to come.
Which solution should you use to make a financial forecast for your shrimp farm?
The easiest and safest way to create your shrimp farm forecasts is to use an online financial forecasting software, like the one we offer at The Business Plan Shop.
There are several advantages to using professional software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- The software helps you identify and correct any inconsistencies in your figures
- You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
- After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
How do I choose a name and register my shrimp farm?
Now that your project of launching a shrimp farm is starting to take shape, it's time to look at the name of your business.
Finding the name itself is generally fairly easy. The difficulty lies in registering it.
To prevent this guide from being too long, we won't go into all the criteria you need to take into account when choosing a striking name for your shrimp farm. However, try to choose a name that is short and distinctive.
Once you have a name that you like, you need to check that it is available, because you cannot use a name that is identical or similar to that of a competitor: this type of parasitic behaviour is an act of unfair competition for which you risk being taken to court by your competitors.
To avoid any problems, you will need to check the availability of the name:
- Your country's company register
- With the trademark register
- With a domain name reservation company such as GoDaddy
- On an Internet search engine
If the desired name is available, you can start the registration process.
It is common to want to use the trading name as the name of the company, and to have a domain name and a registered trademark that also correspond to this name: Example ® (trading name protected by a registered trademark), Example LTD (legal name of the company), example.com (domain name used by the company).
The problem is that each of these names has to be registered with a different entity, and each entity has its own deadlines:
- Registering a domain name is immediate
- Registering a trademark usually takes at least 3 months (if your application is accepted)
- The time taken to register a new business depends on the country, but it's generally quite fast
How do I go about it?
Well, you have two choices:
- Complete all registrations at the same time and cross your fingers for a smooth process.
- Make sure to secure the domain names and trademarks. Once that's done, wait for confirmation of a successful trademark registration before moving on to register the company.
At The Business Plan Shop, we believe it's essential to prioritize securing your domain names and trademarks over the business name. This is because you have the flexibility to use a different trading name than your legal business name if needed.
Regardless, we suggest discussing this matter with your lawyer (see below in this guide) before making any decisions.
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What corporate identity do I want for my shrimp farm?
The following step to start a shrimp farm is to define your company's visual identity.
Visual identity is part of the DNA of your shrimp farm: it makes you recognizable and recognized by your customers, and helps you stand out from the competition. It also helps convey your values, notably through the choice of colors that identify the company.
Creating your business's visual identity yourself is entirely possible: there are several online tools that let you generate color palettes, choose typography and even generate logos.
However, we advise you to delegate this task to a designer or a communications agency for a professional result.
Your corporate identity will include the following elements:
- Your business logo
- Your brand guidelines
- Your business cards
- Design and theme of your website
Logo
Your shrimp farm's logo serves as a quick identifier for your company. It will be featured on all your communication platforms (website, social networks, business cards, etc.) and official documents (invoices, contracts, etc.).
Beyond its appearance, your logo should be easy to use on any type of support and background (white, black, gray, colored, etc.). Ideally, it should be easy to use in a variety of colors.
Brand guidelines
One of the challenges when starting a shrimp farm is to ensure a consistent brand image wherever your company is visible.
This is the role of your company's brand guidelines, which defines the typography and colors used by your brand and thus acts as the protector of your brand image.
Typography refers to the fonts used (family and size). For example, Trebuchet in size 22 for your titles and Times New Roman in size 13 for your texts.
The colors chosen to represent your brand should typically be limited to five (or fewer):
- The main colour,
- A secondary colour (the accent),
- A dark background colour (blue or black),
- A grey background colour (to vary from white),
- Possibly another secondary colour.
Business cards
Classic but a must-have, your business cards will be at your side to help you easily communicate your contact details to your founders, customers, suppliers, recruitment candidates, etc.
In essence, they should feature your logo and adhere to the brand guidelines mentioned earlier.
Website theme
Likewise, the theme of your shrimp farm website will integrate your logo and follow the brand guidelines we talked about earlier.
This will also define the look and feel of all your site's graphic elements:
- Buttons
- Menus
- Forms
- Banners
- Etc.
Understanding the legal and regulatory steps involved in opening a shrimp farm
The next step in opening a shrimp farm is to take the necessary legal and regulatory steps.
We recommend that you be accompanied by a law firm for all of the steps outlined below.
Registering a trademark and protecting the intellectual property of your shrimp farm
The first step is to protect your company's intellectual property.
As mentioned earlier in this guide, you have the option to register a trademark. Your lawyer can assist you with a thorough search to ensure your chosen trademark is unique and doesn't conflict with existing ones and help select the classes (economic activities) and jurisdictions in which to register your trademark.
Your lawyer will also be able to advise you on other steps you could take to protect your company's other intellectual property assets.
Drafting the contractual documents for your shrimp farm
Your shrimp farm will rely on a set of contracts and legal documents for day-to-day operations.
Once again, we strongly recommend that you have these documents drawn up by a lawyer.
Your exact needs will depend on the country in which you are launching your shrimp farm and the size of the company you are planning.
However, you may wish to consider the following documents at a minimum:
- Employment contracts
- General terms and conditions of sale
- General terms and conditions of use for your website
- Privacy Policy for your website
- Cookie Policy for your website
- Invoices
- Etc.
Applying for licences and permits and registering for various taxes
The licenses and permits needed for your business will depend on the country where you are establishing it. Your lawyer can guide you on the regulations relevant to your activity.
Similarly, your chartered accountant will be able to help you register for taxes and take the necessary steps to comply with the tax authorities.
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Writing a business plan for your shrimp farm
The next step in opening a shrimp farm is to draw up your business plan.
What is a shrimp farm's business plan?
A business plan serves as a comprehensive roadmap outlining the objectives, strategies, and key components of your venture.
There are two essential parts to a business plan:
- A numerical part, the financial forecast we mentioned earlier in this guide, which highlights the amount of initial financing needed to launch the business and its potential profitability over the next 3 to 5 years,
- A written part, which presents in detail the project of creating a shrimp farm and provides the necessary context to enable the reader of the business plan to judge the relevance and coherence of the figures included in the forecast.
Your business plan helps guide decision-making by showcasing your vision and financial potential in a coherent manner.
Your business plan will also be essential when you're looking for financing, as your financial partners will ask you for it when deciding whether or not to finance your project to open a shrimp farm. So it's best to produce a professional, reliable, and error-free business plan.
In essence, your business plan is the blueprint to turn your idea into a successful reality.
What tool should you use to create your shrimp farm business plan?
If you want to write a convincing business plan quickly and efficiently, a good solution is to use an online business plan software for business start-ups like the one we offer at The Business Plan Shop.
Using The Business Plan Shop to create a business plan for a shrimp farm has several advantages :
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete startup business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can create scenarios to stress test your forecast's main assumptions
- You can easily track your actual financial performance against your financial forecast by importing accounting data
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
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Financing the launch of your shrimp farm
Once your business plan has been written, you’ll need to think about how you might secure the funding required to open your shrimp farm.
The amount of initial financing required will of course depend on the size of your shrimp farm and the country in which you wish to set up.
Financing your startup will probably require you to obtain a combination of equity and debt, which are the primary financial resources available to businesses.
Equity funding
Equity refers to the amount of money invested in your shrimp farm by founders and investors and is key to starting a business.
Equity provides your company with stable, long-term (often permanent) capital. It also demonstrates the commitment of the company's owners to the project, since these sums can be lost in the event of bankruptcy.
Because the equity invested by the founders may be lost if the project doesn't succeed, it signals to investors and other financial institutions the founders' strong belief in the business's chances of success and might improve the likelihood of obtaining further funding as a result.
In terms of return on investment, equity investors receive dividends paid by the company (provided it is profitable) or realise capital gains by reselling their shares (provided they find a buyer interested in the company).
Equity investors are, therefore, in a very risky position. They stand to lose their initial investment in the case of bankruptcy and will only obtain a return on investment if the business manages to be profitable or sold. On the other hand, they could generate a very high return if the venture is a financial success.
Given their position, equity investors are usually looking to invest in business ventures with sufficient growth and profitability potential to offset their risk.
From the point of view of the company and its creditors, equity reduces risk, since equity providers finance the company and are only remunerated in the event of success.
From a technical standpoint, equity consists of:
- Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
- Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company than doing so as you can repay director loans at any time.
- Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
- Investment grants: these represent any non-refundable amounts received by the company to help it invest in long-term assets.
- Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.
The main sources of equity are as follows:
- Personal contribution from the founders' savings.
- Private investors: business angels, friends and family.
- Crowdfunding campaigns to find investors or collect donations (usually in exchange for a gift).
- Government initiatives such as loans on favourable terms to help partners build up their start-up capital.
Debt funding
Another option for partially funding your shrimp farm is to borrow.
By definition, debt works in the opposite way to equity:
- Debt needs to be repaid, whereas equity is permanent.
- Lenders get a contractually guaranteed return, whereas equity investors only generate a return if the company is a success.
When a company borrows money, it agrees to pay interest and repay the borrowed principal according to a pre-established schedule. Therefore, lenders make money regardless of whether the company is profitable and their main risk is if the company goes bankrupt.
To limit their risk, lenders are usually conservative and cautious in their approach. They only finance projects where they are confident that they will be repaid in full.
Companies borrow in two ways:
- Against their assets: this is the most common way of borrowing. The bank finances a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the company cannot repay, the bank seizes the asset and sells it to limit its losses.
- Against their future cash flows: the bank evaluates the company's financial forecast to estimate its borrowing capacity and assesses the conditions (amount, interest rate, term, etc.) on which it is prepared to lend, taking into account the credit risk posed by the company.
It's difficult to borrow against future cash flow when setting up a shrimp farm, because the business doesn't yet have historical data to reassure lenders about the credibility of the forecasted cash flows.
Borrowing against assets is, therefore, often the only option available to entrepreneurs. What's more, the assets that can be financed with this option must be easy to resell, in the unfortunate event that the bank is forced to seize them, which may limit your options even further.
In terms of possible sources of borrowing, the main sources here are banks and credit institutions. Bear in mind, however, that each institution is different, both in terms of the risk it is prepared to accept and in terms of how the risk of your project will be perceived and what items it will agree to finance.
In some countries, it is also possible to borrow from private investors (directly or via crowdlending platforms) or other companies, but not everywhere.
Things to remember about financing a shrimp farm
There are various ways you can raise the initial financing you need to open your shrimp farm. A minimum amount of equity will be needed to give the project credibility, and bank financing can be sought to complete the package.
Launching your shrimp farm and monitoring progress against your forecast
Once you’ve secured financing, you will finally be ready to launch your shrimp farm. Congratulations!
Celebrate the launch of your business and acknowledge the hard work that brought you here, but remember, this is where the real work begins.
As you know, 50% of business start-ups do not pass the five-year mark. Your priority will be to do everything to secure your business's future.
To do this, it is key to keep an eye on your business plan to ensure that you are on track to achieve your goals.
No one can predict the future with certainty, so it’s likely that your shrimp farm's financial performance will differ from what you predicted in your forecast.
This is why it is recommended to make several forecasts:
- A base case (most likely)
- An optimistic scenario
- And a pessimistic scenario to test the robustness of your financial model
If you follow this approach, your numbers will hopefully be better than your optimistic case and you can consider accelerating your expansion plans. That’s what we wish you anyway!
If, unfortunately, your figures are below your base case (or worse than your pessimistic case), you will need to quickly put in place corrective actions, or consider stopping the activity.
The key, in terms of decision-making, is to regularly compare your real accounting data to your shrimp farm's forecast to:
- Measure the discrepancies and promptly identify where the variances with your base case come from
- Adjust your financial forecast as the year progresses to maintain visibility on future cash flow and cash position
There is nothing worse than waiting for your accountant to prepare your year-end accounts, which can take several months after the end of your financial year (up to nine months in the UK for example), to realise that the performance over the past year was well below the your base case and that your shrimp farm will not have enough cash to keep running over the next twelve months.
This is why using a financial forecasting solution that integrates with accounting software and offers actuals vs. forecast tracking out of the box, like the financial dashboards we offer at The Business Plan Shop, greatly facilitates the task and significantly reduces the risk associated with starting a business.
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Key takeaways
- This guide outlines the 15 key steps to open a shrimp farm.
- The financial forecast is the tool that will enable you to validate the financial viability of your business idea.
- The business plan is the document that will enable you to approach your financial and commercial partners to convince them of the strengths of your project and secure the financing you need to launch your business.
- The real work begins once you've launched your business, and the only way to maintain visibility of your company's future cash flow is to keep your forecast up to date.
- Using a financial planning and analysis platform that combines forecasting, business planning and actual vs. forecast tracking and monitoring, such as The Business Plan Shop, makes the process easier and reduces the risks involved in starting a business.
We hope this guide has helped you understand how to start a shrimp farm. Please don't hesitate to contact us if you have any questions.
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Founder & CEO at The Business Plan Shop Ltd
