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ESTABLISHING A REEF FARMING BUSINESS PLAN | SMALL POLYP STONY CORAL (SPS) BROOD STOCK PRODUCTION
INCOME TAX FOR REEF FARMERS PART 1

ISSUE # 13 page 3 JANUARY 1997

ESTABLISHING A REEF FARMING BUSINESS PLAN

Establishing a reef propagation enterprise as a business is our subject matter for this series, whether it is a part time hobbyist activity or a full time activity providing all of the income for you and your family. In stating this and pursuing the topic along these lines I have skipped over the whole beginning discussion of whether you are going to , or are suited to run your own business. For the sake of this discussion we are assuming that you have made the decision to pursue beginning your own reef propagation enterprise.
This is something that is going to involve you in a lot of tedious activities, business planning, business structure and accounting systems and tax preparation, financial statements etc. These ARE tedious, no getting around it, but, if you are to be successful in your enterprise you have to be able to deal with them competently yourself, it is not good enough to say " well I'll just call my accountant or lawyer". Sorry, wrong answer. YOU have to deal with these yourself, your beginning business cannot stand the expense of constant billable-cost telephone calls. One of the most tedious activities for most of us, myself included, is developing a business plan.

In a recent column Sally Jo asked the question,
" How do you know where you are going,
if you don't know where you are at"?
A Business Plan tells you where you are,
and where you will be down the road.

Many of us say, "well , if I don't go to a bank, I don't need a business plan". Wrong answer!!!!!!
It is a common misconception that the purpose of a business plan is to obtain financing to begin or to expand an existing business. This is just one of the purposes of a business plan, and it is true, most lenders , including the SBA (Small Business Administration) require a business plan to obtain financing for a business. But the Business Plan has a greater reason for being.
One recent author(Stephen Harper) stated that " The probability of being successful in starting a new business is directly related to the extent that your Business Plan is accurate and complete".
A Business Plan is not the simple request to a lender for financing, it is your 'Blueprint' for a Business Success. The Business Plan answers questions for you on the type and direction of your company. It identifies questions that you need to answer for your business to be successful.
The Business Plan provides a basis for you to be able to make the decisions that you need to make in order for your business to be successful.
In a recent column Sally Jo asked the question, " How do you know where you are going, if you don't know where you are at"? A Business Plan tells you where you are, and where you will be down the road. Anyone who tries to build anything without a plan is walking on very thin ice, and building a business without a plan is almost a guaranteed plan for disaster, the old cliche " failure to plan is planning to fail" is very true in this.
The Business Plan is important if you want financing, but it has many other reasons for being. It identifies the WHO, WHAT, WHEN, WHERE,HOW MUCH & WHY of your reef propagation enterprise. It is very much an indicator of your future success in your enterprise, in that your skills as a manager in developing your Business Plan are going to be a direct reflection of your Business Enterprise. If you lack the patience to deal with the tedium of developing a Business Plan, or the perseverance, skill, and the information to prepare a complete Business Plan then you will probably not be successful in a business of your own, and should be looking at the Reef Propagation as a hobby. The track record of marine hatcheries in the last 20 years has not been a great one, very few have survived over a long period of time.
The purpose of this series is not to discourage you, but to give you the tools that you will need to succeed. I am going to tell you one thing that all of the business books I have on my shelf seem to leave out of their plans-PASSION!!! You truly need to have a true passion for aquaria, marines and reef creatures in order to succeed with this. To quote another friend, you need to be a 'true reef geek'!
To all of the other things that I am going to discuss in this 2 part series, that is my first priority that I see to succeed in your Reef Propagation Enterprise. You must have a true passion for the reefs! There is a reason for this, you can start a restaurant, and when you close the doors at night, the food is in the cooler, and you clean up and go home, and forget it until the next day. And barring burglaries or fire or some such you are ready for business the next day. If you have a computer shop, you close the doors at night and go home and forget it.
top of next column
In most all businesses when day is done, you go home and forget it,NOT in livestock farming, and this is what this is, livestock farming. Livestock don't go 'on the shelf' when day is done, they are living creatures that need to be monitored and cared for.

If you do not have a
PASSION FOR MARINE CREATURES
you will not be able to put in the
hours that you will need to.

This means, often, long hours just in their maintenance. This is why Soviet collective farms were , are, a failure and have such dismal production figures in comparison to their sizes, you cannot care for livestock on a standard 40 hour week schedule. If you do not have a PASSION FOR MARINE CREATURES you will not be able to put in the hours that you will need to. If you are spawning marine fish most spawn at night or they hatch at night, when others are home eating dinner you need to be there collecting larvae or eggs. And, the examples go on and on. The first Rule for Successful Marine Enterprises: Have a PASSION for Marines!
Most Business Plans are divided into three basic areas: An Overview of the Business, Discussion on marketing, Creating and keeping Customers, and Financial Projections that include Profit Levels over the First few Years of Operation.
I have summarized several plans in the following Outline of a Business Plan .
I. SUMMARY
II. TABLE OF CONTENTS
III. OVERVIEW OF CONCEPT
   A. Identification of the market
   B. Growth & Financial Objectives of the Business
   C. Discussion of legal Form of organization & Ownership
   D.Profiles of Owners and Management team(Biographies)
   E. Description of the markets to be served and the Location of the Business
   F. Basis for Financing the Business
   G. Timetable for Establishing the Business and Development Goals

IV. MARKETING PLAN OF THE BUSINESS PLAN
   A. Description of the Industry, Overview, History, Trends B.Analysis of Immediate and Prospective Competition
   C. Profile of Target Market, and Geographic Area to Serve
   D. Presentation of market mix for creating and maintaining customers
   E. Projected Sales and market Share
   F. Identification of any Proprietary Ownerships, patents, licenses,copyrights, franchises,exclusive agreements

V. FINANCIAL PART OF THE BUSINESS PLAN
   A. Projected Initial Capital Requirement
   B. Projected Opening Balance Sheet
   C.Projected First Year-End Income Statement
   D Projected First year-End Balance Sheet
   E. Projected Cash Flow of The First Year
   F.Projected Income Statements for Year Two through Fifth Year
   G. Project Balance Sheets for years through Five
   H.Key Operating Ratios
   I.Description of Debt Sources & Equity Financing
   J.Projected Return for Owners/Investors

VI. SUPPLEMENTAL FACTORS
   A. Identification of Risks and Insurance Coverage
   B.Identification of Employee related regulations and tax reporting requirements.
   C.Identification of ALL Legal factors including licensing, zoning and building requirements and reporting requirements.

As you can see, the Business Plan is a complete overview of the structure and operation of a business, after you complete it you are FOREARMED AND FOREWARNED of the obstacles facing your business.
In Part Two of this series next month I will go into the details of the Outline and expand on the overall Business Plan. When we are through you should have a basic understanding of what is needed and be able to set about writing your own Plan for Success, the Business Plan.

Enjoy, remember that this is the year of the ocean,
save a reef, grow your own!

SMALL POLYP STONY CORAL (SPS) BROOD STOCK PRODUCTION

RESEARCH ON AGGRESSION AND INTENSE CULTURE METHODS

The research we have been doing at Geothermal Aquaculture Research Foundation Inc. GARF during the last three years has produced several new methods of propagating and displaying small polyp stony corals. The one hundred plus types of sps corals we are working with are all from captive grown stock. These corals come from all parts of the World and are all being data banked and numbers will be attached to each animal so we will be able to tell you what generation of coral comes from us as well as the species and origin. We have not added any wild corals for over eighteen months.

We keep these corals in several types of systems with many types of lighting. There are many ways to do coral propagation, and the methods and products discussed in this article have worked the best for us. We will be very careful to not say that one way will work in every situation. These methods are listed so researchers can duplicate this research.

THIS ARAGOCRETE^TM ARCH HAS OVER A DOZEN
DIFFERENT SPS CORALS GLUED TO IT.
THESE CORALS ARE GROWING VERY FAST UNDER THE 8 VHO LIGHTS
arch

When first starting this process of growing sps corals we were concerned about the survival rate when propagating these delicate corals. Also we began to research better and safer ways to transport these corals for shipping. I must say that our success and that of others who have studied these methods are very impressive.

This article will explain the Super glue method we use to attach sps corals, new display methods for creating coral aquascapes, and several ways to produce sps corals for sale. We will explain how to increase the growth rate and sustain their incredible colors. Polyp extension is one way of telling how healthy the animal is and whether or not it is happy in its new environment. We will also explain how we grow these corals in an inexpensive system using VHO lighting. Water quality and flow will be discussed. The most recent research we are embarking on has to do with the feeding of these animals and the zooxanthellae that lives within them.

THIS PICTURE SHOWS HOW WE MOUNT THE CORALS
USING SUPER REEF GLUE. NOTE THE CORALS GLUED TO
THE BACK GLASS.
reef corals

BASIC SPS CORAL PROPAGATION

The corals we are working with are listed below starting with the ones that we have found to be the most hardy. These corals need to be kept in an aged, well established system. We tell our students that their reef aquarium is ready for the first sps corals when the coralline algae spots on the power heads are the size of dimes. We have found that by the time the reef aquarium is growing coralline algae of this size most of the other invertebrates are doing well. We have them start this project by gluing several small fragments of Montipora and Pocillapora to the live rock in the center of the reef. We place these frags about one half way down in the aquarium.

Most corals have a much easier time adapting to lower light. We will explain how to glue the frags underwater in the next section of this article. Underwater gluing allows us to place the frags anywhere in the reef aquarium. The glue allows us to move the frags up toward the light as they start to grow. Most sps corals are heavy and the glue allows them to stay in place until you decide it is time for them to move up closer to the light or once they have grown out of the water to cut the top off and reattach them in your system.

Before placing the sps corals in your established reef system you must make sure to make room for them. Although most sps coral frags are small they will grow fast if given the right conditions and an all out fight will take place between your soft corals and your sps corals if you do not take into consideration the amount of room they will need for future growth. We have found out the hard way that it is best to place these sps corals on a rock all by themselves. We have attached them to live rocks with other animals such as mushrooms or zoanthids and found out these animals will sting and cause die back in your sps corals.

SMALL POLYP STONY CORAL MONTIPORA - POCILLOPORA - SERATOPHORA - HYDNOPHORA -- PORITES - PAVONA -STYLOPHORA - ACROPORA - ANACROPORA -

project #1 - gluing frags to dry base rock

This is a very good way to treat a small head of coral that you have just purchased. We have many reports from people who have brought home very healthy coral heads from the local pet shop only to have these corals start to die from the bottom up. We had this happen several times when we imported these corals. We would try to place the heads so they received good lighting and strong water flow, but often the shaded part of the head would turn white and die. Several times the entire coral would then slowly do the same. We noticed that if we took frags from this coral and attached them to rocks they would often start to grow. Corals grow to fit their environment and there is no way to match this set of ocean conditions in an aquarium. By starting frags in our reef aquariums we allow the new coral heads to grow to match these conditions. We have been bringing in some large heads of captive grown sps corals from the members of our unconnected genetic bank, and we have not had the same problems.

We often receive sps corals that look brown and once they are placed in our systems for a month the color changes to green, pinks and even purple. We use VHO's over most of our systems. We end up with at least 10 watts per gallon of light, doing this gradually so as not to shock any of the tank mates. We have worked with some wonderful people in this hobby who provide incredible propagated animals to our genetic bank. Some of our prized corals come from Steve Tyree, Mike Paletta, Dick Perin, , and many individuals who trade their propagated coral for a new one that they do not have yet.

Before using the super reef glue we did our homework and tested the different glues on the market and found out that the Army was using glue on humans when they were wounded during the War. Note when you glue your fingers together it doesn1t hurt it just sticks. Since then we have over used way over 1100 grams of glue in our systems. Sometime it is found to be on my cloths or on my hands. I even accidentally glued my dog to the floor (some glue had dripped on the floor and my dog is always under foot and she stepped on it and could not figure out why she could not move).

Fragments of sps corals do extremely well when glued with thick super glue. These corals look like they are almost floating above the base rock. Only the center skeleton is attached at first. These cuttings have been very strong even before the tissue grows down onto the base rock. In a very short period of time you will notice that the animal begins to grow right over the glue and unto the rock itself. We learned that when we use this method for attaching corals the cut heals right away, and this allows the animal to recover from the propagation immediately. Several fragments have fallen in the aquarium. Very few cuttings have broken loose, but one fragment broke in half and the glue held it on the base. We have taught several of the larger coral farmers this method of attaching sps corals. They have reported that they can now propagate these corals with a savings of two thirds on labor. These farmers had been using epoxy to attach the corals before.

THE GREEN ACROPORA IS KILLING THE MONTIPORA
SO IT CAN OVERGROW THE CORAL. WE ARE ALLOWING
SEVERAL CORALS IN THIS REEF TO COMPETE FOR SPACE.
WE MOVE ALL OF THE OTHER CORALS BEFORE THIS HAPPENS

We have noticed that once the animal has grown over the super reef glue and unto the rock you can pop off the original frag and place it on a new rock with the glue and have the old one that attached to the first rock continue to grow and develop into branches and soon be ready for fragging in the future.

One of the reasons we did not like the epoxy is that it took a very long time for coralline algae to grow on it. It also takes a long time for the epoxy to set, and what we can do in a short period time takes hours with the epoxy method. The sps coral covers the super glue in a few weeks in our systems. We are now buying many of our new frags unmounted so we can glue them in our systems. This way of purchasing sps corals can often save money because the grower does not have any time in the grow - out. If you purchase frags this way be certain that each type is bagged in a separate bag. We only put corals together that came from the same colony. We often receive three to five frags in one bag and they all do fine. We float the bag until the water is the same temperature as the reef aquarium. These corals can be mounted the same way as the freshly harvested ones from your aquarium.

THE ORANGE MONTIPORA IS GROWING OVER THE
GREEN MONTIPORA. THIS IS A COMMON TYPE
OF AGGRESSION ALLOWING THE ORANGE
CORAL TO SHADE THE GREEN ONE.
war

The most interesting thing is that none of the polyps around the base die. When we use epoxy some tissue always dies. I love to watch the polyps grow down onto the base rock. They form a circle of polyps around the fragment, and then new branches start up from this base. Some of the bases are now over four inches wide. We have removed the original cuttings, and the bases are growing several new branches. Some of the colonies have been cut four times and they now have over sixty branches. It seems the more attention you pay to these sps corals the better results you will see. We tend to propagate them often and spread the risk to different systems in the Foundation to make sure that one animal will survive. We honestly have loss more animals due to freight than any other reason.

Small pieces of small polyp stony corals can be glued to larger rocks by breaking off small pieces from the colony. These frags are glued one inch apart. The bases grow together and the coral forms a natural looking head very soon.

TOOL LIST ??1/2"wood chisel
??Small wire cutting pliers
??Tweezers
?? two small bowls full of reef water
?? Cutting board
??Small plastic pans

MATERIAL LIST
??glue type Super glue
??Reef aquarium safe rocks - aragonite, lava, tufa
??Coral to be cut

?? Paper towels

Make sure to have a towel in place to wipe your hands and to clean up spills.

THIS IS THE END VIEW OF THE 150 GALLON REEF
SHOWING HOW CLOSE TOGETHER THESE CORALS
ARE PLACED. WE WILL MOVE AND TRIM THEM AS THEY GROW

Prepare the fragments by breaking a small branch from the parent colony. This can be done by using a small pair of pliers. We use side cutting pliers to snap the frags from the colony. The coral will break rather than cut. Grip the branch firmly and twist it gently. These frags are placed in a plastic pan of reef water. If at all possible it is best to make your cutting outside of the reef tank so that the toxic slime released when propagating is not left in your system. I always treat with the Sea Chem Reef Plus after propagating both the sps corals and the soft corals.

Choose the base rocks and prepare the attachment sites. Place the fresh cut on the paper towel for 10 seconds. Apply the thick super glue to the prepared site on the base rock. Two drops are usually sufficient. Pick up the cutting and press the newly cut fragment to the prepared site. Making sure that you pay attention to which side you glue down to the rock. The freshly cut frag should be attached right where you made your cut. It is harder to tell which side you should glue when receiving coral frags from a dealer but usually the side that is widest is the side to place the glue and adhere to the rock.

CORAL FRAGS FROM THE SAME COLONY CAN BE CROWDED
TOGETHER. THESE PHOTOS FROM DIRK'S FARM SHOW HOW
HE GROWS MANY CUTTINGS USING BUD VASES.
coral

You can use many methods to hold your cuttings while they grow. We often use concrete reef plugs and drilled plastic racks. These corals are in plastic boxes and plastic bud vases. Try to control the growth of macro algae so they do not touch your sps corals. We try to keep all macro algae out of our grow out tanks. Place the cutting and base rock into the bowl of aquarium water for 2 minutes. Place the new fragments in the reef aquarium so that the cutting receives adequate light and strong current. Be very certain that the new frags can not fall over.

THESE BRIGHT COLORED SPS CORALS WILL BE FRAGGED
OR MOVED BEFORE THEY GROW LARGE ENOUGH TO TOUCH.
THE SUPER REEF GLUE MAKES IT VERY EASY TO MOVE THESE
CORALS. WE CAN POP THEM OFF AND THEN RETURN THEM TO
THE SAME SPOT AFTER WE CUT FRAGS OFF OF THEM.
purplwe frag

If we have a problem with any algae we place a handful of our Reef Janitors in these grow out systems. Our newest finding is the remarkable bubble algae eating Emerald crab that eats several kinds of algae that the other Janitors won1t touch.

THESE TEST TUBE TRAYS ALLOW DIRK TO GROW A LARGE NUMBER OF SPS FRAGS
IN EACH OF HIS SHOW AQUARIUMS. WHEN HE SENDS US THE FINISHED CORALS
WE REMOVE THE RUBBER LID AND GLUE IT TO OUR ROCKS. THESE SMALL LIDS ARE
VERY EASY TO HIDE, AND THE CORAL GROWS OVER THEM VERY FAST.
coral

- NEW -

We have been gluing many frags to live rocks underwater. When a new colony comes into the lab we break off several of the lower branches. We apply glue type super glue to the broken part of the coral. A ball of glue the size of a pencil eraser will hold most frags in place. We pick a spot in one of the show tanks, and quickly push the frag against the live rock. A slight twist to spread the glue on the surface of the live rock helps. Count to 30 and release the frag. Not only does it hold the new cutting in place it gives you the freedom to move it when you need to. Just pop the animal off by the glue and reglue it to the next location. All of my sps coral frags when I first introduced them to my system where about the size of 1/2 inch. Now I have a sps coral forest and I made over 100 cuttings just last week.

FRAGS THAT DO NOT COME FROM THE SAME COLONY
MUST NOT BE ALLOWED TO TOUCH EACH OTHER.
THE TALLER PURPLE FRAGS WILL BE MOVED BEFORE THE
OTHERS GROW MUCH LARGER
coral

- Research update -
We have been doing tests to determine the best size of frags to use to produce cuttings for sale. It seems that with many of the species of Acropora the smaller cuttings grow faster than larger ones. Smaller cuttings are often less than 1/4 inch long. The larger cuttings are over 1 inch long. Many of the small cuttings have grown much faster.

We have noticed that the sps coral will grow right over a snail shell if the shell stays in one place too long. You can notice this in this picture. This coral has been in Sally Jo system almost one year now and has found new homes all around the US.

WE WILL PHOTOGRAPH THIS CORAL OFTEN AS IT COVERS
THIS SHELL WITH TISSUE.
snail coral

THIS CERITH SNAIL IS AN IMPORTANT REEF JANITOR^TM
THESE ARE ONE OF THE ONLY SNAILS THAT EAT HAIR ALGAE.
ALGAE CONTROL IS VERY IMPORTANT TO THE HEALTH OF SPS CORALS
coral

You need to have a system in place that does not have algae problems. Once an algae gets on your sps corals you will probably loose the coral. If you look closely at all the pictures of my systems you will not see any algae, that is because I place the reef janitors in my system and make them part of my monthly maintenance schedule. These janitors do very well in captivity and are tested by our research Foundation to be the best mixture to provide your system with the perfect balance you need to grow these corals. However some do die off from time to time and need to be replaced. Because of all the skimming we do and the other fish we have in our systems these janitors tend not to reproduce or the larva gets skimmed out.

THIS ACROPORA IS GROWING OVER THE SNAIL SHELL.
WE HAVE NOTICED THAT THESE CORALS GROW OVER
SHELLS VERY FAST.
THE NEW TISSUE IS OFTEN VERY BRIGHT COLORED
snail coral

NERITE SNAILS FROM THE REEF JANITOR^TM PACKAGES
EAT DIATOMS AND RED SLIME BEFORE THEY
CAN OVERGROW THE YOUNG CORAL FRAGS
nerite

We look at these reef systems as a continually changing life form. The more your corals grow the more water movement you will need to provide. We never start out a new reef system with intense lights so as to enable my newly set up reef to grow coralline algae and once that has taken hold on all the rock then we begin to increase the lighting gradually over a period of time until it is up to over 10 watts per gallon. In our show tanks we use the VHO's and there absolutely has been NO coral that we have not been able to grow. We have a two year old baby flower pot that came from captivity. The mother had thirteen babies in one year.

SOME NOTES FROM SALLY JO

We are a research facility in Boise Idaho and our mission is to - To provide the citizens of Idaho and the World a showcase collection of aquatic plants, fish, reef animals and products. To stimulate interest in, appreciation for and an understanding of these collections. To be implemented through plant records, public displays, collections, applied research, publications, internship programs and sales of quality products.

Having dedicated our Foundation to this mission we are a Non-profit organization that provides all of our research material to everyone. We post this monthly newsletter on our site www.garf.org. We have published articles in SeaScope, FAMA and Marine Fish Monthly. We host seminars at our location at least three times a year, with the pioneers of the reef hobby sharing all of their knowledge. We also have an annual reef tour when our members open up their homes and share their reef results with the general public. We have our next seminar scheduled for the last weekend in March of 1998.

We appreciate any feedback from individuals who practice this new method or any other method. This allows us to provide information and status reports on our site.

When looking at my system you will notice that I tend to have an incredible amount of diversity in my system. This is important. I even tell LeRoy if I can count how many corals I have in my system then I do not have enough. I do have over 175 different species of coral growing in this 55 gallon reef tank. Only about 5 of the 175 corals came from the ocean the rest I have grown in captivity and have nurtured to health. I have over 50 different species of sps corals growing amongst the soft corals that were started in this system.

You must come up with a schedule of chores that need to be completed daily, weekly and monthly for your reef system and stick with it. I have found that by paying attention to the animal itself I have the best results. They need care and a stable environment.

Because of the amount of corals that I keep in my system I tend to have to propagate often. My system will be two years old on Feb, 14th 1998. This was the best Valentines present I could have received from my husband and if he had not given me my first system I probably never would have had the courage to setup my first reef system. Now I am up to three systems in my office and maintain all the Foundations reef systems with the supplements that I have found to work best with what we are doing. You must understand that there are no two tanks alike and that the more time and energy you spend with your reef system the better your results will be.

We add supplements to all of our systems and all of our makeup water. As well as we feed our systems rotifers and green water. Strong light, good water movement and room for them to grow is a must for these special animals. I also have found that some of the more brightly colored sps corals do not always like to be right on the top of your system and tend to color up more in lower light so move these corals around until you feel you have given them the best spot in your system. We continue to learn more about the sps corals and are commited to share our knowledge with everyone.

GARF WILL BE PURCHASING MANY MORE AQUACULTURED CORALS
FROM AS MANY GROWERS AS POSSIBLE. WE WILL MAKE THESE STRAINS
OF CORALS AVAILABLE TO AS MANY NEW FARMERS AS WE CAN.
GARF IS MORE CERTAIN THAN EVER THAT THIS HOBBY WILL GROW
TO SUPPORT ANY REEF FARMER WHO PRODUCES A QUALITY PRODUCT.
coral

INCOME TAX FOR REEF FARMERS PART 1

On April 15th we get the 'privilege' of paying our income taxes for living in our country, and this includes taxes on all of our incomes, whether from a wage paying job or self employment. This month I am going to briefly cover how we can report our income and/or losses from our reef propagation enterprise on our taxes.

Using these forms properly will let
you MINIMIZE YOUR TAXES
which is legal,

AVOIDANCE OF TAXES
IS ILLEGAL!!!!

If, you have outside income or losses to report we must use the 1040 'long form' when filing our returns. Using these forms properly will let you MINIMIZE YOUR TAXES which is legal, AVOIDANCE OF TAXES IS ILLEGAL!!!!

For the sake of illustration I have used figures for a reef propagation enterprise, begun in March of 1997 and we began this with 8 each 75 gal tanks that we have set up in the basement of our home. My associate Joe Woods and I have found that each 75 gal tank represents about $ 300 in expenses in setting up. I havenot included the FORM8829 which is Expenses for Business Use of Your Home, as this is one of the most common disallowed expenses in tax filing. As we had a partial year in business I elected not to report Home Use for the Business this year.