ISSUE # 16 page 3 APRIL 1998

Production Planning for the Reef Enterprise

CAN CAPTIVE REEF PROPAGATION BE DONE PROFITABLY?
REEF PROPAGATION COSTS AND COST TRACKING
COSTS TRACKING FOR THE REEF ENTERPRISE
GENERAL LEDGER ENTRIES
BREAK EVEN POINTS AND COST/VOLUME ANALYSES FOR REEF PROPAGATION
BUSINESS PLANNING TECHNIQUE - PRICING FOR PROFIT
FINANCIAL STATEMENTS & DBA FORMS
INCOME TAX FOR REEF FARMERS PART 1
ESTABLISHING A REEF FARMING BUSINESS PLAN
REEF FARMING BUSINESS PLAN - PART 2
REEF FARMING RESOURCES - BOOKS FOR SUCCESS

Because of some interesting email I would like to discuss a sample reef propagation operation to produce corals, using the system of tanks and vats that I am developing for my own operation.

In this system I maintain my breeding colonies of corals on racks in 75 gallon tanks. The cuttings are, will be grown out in 4' long by 2' wide by 12'' deep plywood vats, lined with 4 mil. plastic. The vats are racked 3 high on a 2'' by 4'' rack. I will be using a large plywood sump on the floor for 4 of the racks, pumping the water to a header above the top vats and the water drains from each vat down to the next one and then into the sump. The bottom vats are 16'' deep to allow the water to gravity flow into the 16'' sumps. The final plan calls for 18 of these vats.

The tanks are in two rows, of 12' with a 3' aisle between them, with two sumps on the floor between them that service 8 tanks. There is a 4' aisle on the outside side of the tanks with a work counter about 30'' wide to work on.

On the far side of the tanks there is a 3' aisle, and then the two rows of vats begin. with a 3' aisle between them and a 3' aisle on the far side of the rows of vats. The whole space takes up a room of 16' by 26' to raise the corals. Cement rocks are made in another area.

I have designed this modest layout to be a moderate income producer for the first year of operation, and will expand it as business can be built. I also intend to do some fish rearing in an adjacent space and this will probably involve another dozen large tanks, 55s and 75s plus some vats and smaller tanks for larvae and fry production and also a artemia and rotifer and phytoplankton rearing area.

The first years production, by one worker is planned to be a gross net of about $25,000. The planning is to average sales of 7 boxes of corals a week at an average price of $100 per box, delivered. keep in mind that boxes vary in size, mine will accommodate about 15-18 pieces, of various sizes.

So, how do I arrive at the figure of $25,000 gross net (before taxes)? Remember in previous articles I showed how to figure gross sales needed to reach the break even point (where sales equal and cancel out expenses) and how to figure sales needed to reach a target income.

The formula for reaching the figure for the net before taxes is:

I do not yet have a complete overhead budget from past history so this had to be estimated, the figures for that are as follows:

rent		$3600.00
electricity		960.00
salt		480.00
water		250.00
replacement lamps		2160.00
bags		150.00
insurance		500.00
delivery expense		600.00
miscellaneous		800.00
telephone share		400.00

and a round estimate of 10,000.00
for OPERATING OVERHEAD.

This is not including any building expenses, just operating expenses. Some supplies I have and others will be added, but this gives a working figure which will in all probability be raised in future budgets. For now, its a figure to work with.

NET $25,000=GROSS SALES-$10,000
GROSS SALES = NET SALES (25,000) + OPERATING OVERHEAD(10,000)
GROSS SALES= $35,000

So I need to make annual GROSS SALES OF $35,000 to make a NET of $25,000. This is an average of 7 boxes a week but in the summer slow season this is not apt to be realized. These are planning figures, and actual results will vary, but, if all goes according to plan the year end results will be somewhere approximately around this.

Note, these figures do not include any debt payments. All equipment is paid for by the enterprise and no loans for business building or operation are anticipated. Once an enterprise begins sales, however small, the enterprise can build itself, and should, if, it wont pay its own way then its probably better to think of it as a hobby, and enjoy that. You do need a passion for this, if you do not, you will not succeed, you will experience burn out and not give your livestock the care and attention that they need. But, if you do have a passion for this then you can make it work.

The first years income is a modest projection, but it is well able to increase in the future with more experience and bigger and more brood colonies.

One other thing to point out and to emphasize, this assumes that I, and anyone doing this, can keep and maintain corals successfully, that I can reproduce them, and that I can establish relationships with businesses to sell them to at a price that they can make a profit with, and that I can get the finished product to them. If you read my bio in the Jan and February newsletter you can see that I have done all of these for some years. To enter into this kind of an enterprise without the experience and knowledge to do these things would be a fatal mistake for the enterprise.

If, you do not have the experience, then get it by doing it. One thing I would strongly suggest is to work part time in a good pet shop to get a feel for what their needs are. While doing that set up several tanks of corals and begin to grow some brood stock and then to reproduce them. Grow your business at home until it can begin to grow itself. You will reach a point where you can swap corals to stores for more equipment, watch the classified ads in bigger city newspapers and begin to pick up tanks and equipment. Build some vats for coral cutting growout. make them shallow to get best advantage of your lighting. Experiment on your rock making and develop ones that work for you and your customers. It all takes time, but, it all needs to be gone through.

I have a degree in animal and fisheries science, and masters work in fisheries, plus associates degrees in business and accounting, but, that is not the main requirement, I still had to learn what I know best from applied experience. You can learn what you need to learn from the net, from others and from your own experiences, share them with others, and find out how others do things. The biggest part of this is using your common sense and being willing to learn and taking advantage of chances to do so. Visit shops and see what they are selling, find out what they like to sell and what sells well for them, and build a product list that you can live with. You can also add other products to your line besides corals, look at what is needed and see what you can come up with.

Read, and reread Paul Hawkens book titled, GROWING A BUSINESS. Then apply it to your own enterprise. Watch your expenses like a hawk, and improvise and make do while you are planning on growing your own business. Most of all, ENJOY IT!!!! If you do not enjoy what you are doing, do something else! This is not for everyone, but, if it is for you, then go for it.

Share your experiences with us through GARF, email me on any questions.

SAVE REEFS, GROW THEM

LEATHER CORAL PROPAGATION USING THE GLUE NET COMBO

LEATHER CORALS SELL VERY WELL We have been collecting several types of leather or cabbage corals. These corals can grow very fast in the right aquarium set up. They seem to do better when they are grown in bright light and strong water flow. Several of the corals we grow have nice large polyps along the edges of the body. These types are very popular. I used to think that these corals did not do very well in our marketing research because we did have very many of them in the lab. I learned that there were only a few left because they sell very well. They need plenty of room to grow and after being propagated tend to shrink up and the polyps take awhile to extend. This mother colony actually came from a very kind young man who had to leave for Ireland for a year or two and didn't want to just give away all he had strived for. So he drove this beautiful animal amoung many others to the Foundation for our care. We find that you can propagate this animal and glue other specimens such as green stars to the same rock. It does not seem to fight or sting other corals. This well developed mother made over 30 cuttings. We take this animal out of the reef tank and propagate in the open air and dip the mother in a bowl of fresh salt water before placing it back into the system. The mother will recover and grow back slowly.

The group of soft corals we are working with this month are all in the order Alcyonaria and they are sold under many common names. We have seen them sold as Leather corals, Cabbage corals, Lettuce corals, Cauliflower corals , and Finger leathers. The corals in this group come from any one of several genera including Lobophyum, Sarcophyton, Sinularia, and several others. All of the corals in the the leather coral group can be propagated using this method. The corals we used in the pictures are some of the more difficult to attach because they can shrink to a very small size. We have found that by using a thin strip of bridal veil netting along with the glue we can attach the corals very fast. The netting is streched across the base of the cutting after it is glued to the plug. It is very important that the cutting is dipped into reef water as soon a possible. The glue heats up when it cures and you must cool the cutting before damage can take place. The glue will seal the cut and help keep the cutting from becoming infected.

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It is best if you can remove the coral from the brood stock aquarium before you cut it. We have had some problems with these types of corals when we cut them underwater. Many of the softer types bleed quite a bit when they are cut and the fluid can be toxic. We placed this large coral in a bowl of water from the aquarium it came from. A second bowl of reef water was set aside for the cuttings. After we finished cutting the large coral we washed it before placing it back in the reef to grow again. It is important to watch the temperature of the smaller bowls so they do not drop below the safe zone of 74 to 80 degrees. You do not want to stress the cuttings any more than you have to. We are certain that by being able to process all 30 cuttings in a few minutes by using the glue we reduce the stress. When the coral is in the bowl you can start to map out the best way to cut it so that you can get the best cuttings while doing the least damage. We try to remove the edges of the soft corals so we can keep the main body of the coral whole. The corals seem to have a strong repair mode they go into and the central part of the stalk may not heal as fast as the edges. We do not often remove more than 1/2 of the tissue around the outside of the corla.

BE BOLD Use very sharp scissors and make fast clean cuts, do not saw through timidly. You want the cuts to be as clean and smooth as possible so the coral can form a skin over the damage.

We have seen Sarcophyton from Palau start to heal in less than one day. Some of the corals in our lab get so large that they grow out of the water. We then take the scissors and remove the entire head leaving the 4 inch thick stalk to heal.

When the skin has formed over the top of the stalk it only takes about a week before the entire healed cut starts to grow polyps. We take the head of the coral into Sally Jo's office and cut it into 1/2 inch slices that look like a pizza. We drop the slices into the bottom of her cutting tank for a week and they heal and start to attach to the gravel. The Sarcophyton cuttings are heavy enough to sink right to the bottom. When we tried that with Sinularia and Lobophytum cutting they almost always blow into dark corners and die. That is why we needed to develop a method that would attach these corals to rocks without the trouble of them working loose in the cutting tanks. It takes a lot of extra time to remove empty plugs after we have set a group of corals for a grow out.

TOOLS AND MATERIALS YOU NEED 1. SHARP SCISSORS 2. TWO PLASTIC BOWLS 3. ROCKS OR REEF PLUGS    We use aragocreteTM or other safe rock 4. LARGE HOLE BRIDAL VEIL NETTING    Cut veil into 1/4 inch strips 5. SUPER GLUE GEL 6. RUBBER BANDS

METHOD WE USE 1. REMOVE CORAL FROM REEF AQUARIUM 2. PLACE CORAL IN BOWL OF WARM REEF WATER 3.CUT FIRST PIECE FROM CORAL. 4. PUT LARGE DROP OF GLUE ON ROCK 5. PLACE CUTTING ON GLUE AND TURN IT OVER    You want some glue on both sides 6. STRETCH NETTING OVER BASE OF CUTTING 7. PUT CUTTING IN BOWL OF WATER.

This method can be tried when the other two methods we use on these corals do not seem to be working. The first and fastest method that we try on a new coral is the one that works fine on the Sarcophyton from Palau. We just put a bit of glue on a plug and glue the coral to the rock. These corals do not shrink much and the glue holds them in place until they grow onto the rock. The second method we use for very soft corals is the one where we cover the entire cutting with netting and then we rubber band it in place. The corals stay put but there are two problems with this method. the corals often do not get enough water flow under the netting and they die. When they do grow, they sometimes stick to the netting instead of the rock. You can see in this picture how the netting is over just the base of the cutting. The netting is embedded in the glue so it gives the cutting support. The netting allows us to pull the cutting down into the glue so that it can not shrink out from under the glue. We have have very good success with this method on the flat growing soft corals. When the cutting is attached we trim off the extra netting, and the rest of the netting and the glue soon grows coralline algae. We will have some pictures of these cuttings in a future issue.

SOME GREAT PROPAGATION LINKS $19.00 COMBO REEF PLUG PROJECT $49.00 MUSHROOM ROCK PROJECT MUSHROOM PROPAGATION GROWING SPS CORALS IN PLASTIC BUD VASES GROWING BROODSTOCK ZOANTHID COMBO ROCK PROPAGATION XENIA GROWING FOR THE LOCAL MARKET PROPAGATION OF COMBINATION ROCKS Thank you all so much for taking the time to read about the research we are doing.

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This month I am going to discuss another 'mechanic' of beginning the reef enterprise, the actual mechanics of building the production base of your propagation enterprise.

In past issues I have referred to a "production module". What I have meant by this and explained is an array of equipment planned out to achieve a sustained production of reef organisms. In order to achieve this you need brood stock and a place to house them, and a place to put cuttings of the brood stock while they grow out to saleable size. For some species this can be achieved in one tank and in others you will need several. I find for growout that shallow tanks or vats work best. I like the tanks for maintaining the colonies for the visibility that the clear glass sides gives to observe the brood stock.

I think that making your own rocks is far preferable to other methods and will give you a superior product. I have found that for a one man operation an area 8' by 12' or so will give me enough room to make the rocks I need. I let the rocks cure after pouring for two days and then give them a 6-7 week soak in fresh water and then I store them in Rubbermaid 'trash cans' for several weeks until I need them. This has been covered in other issues of the newsletter and elsewhere, in detail. one thing I would point out is that it is not a good idea to make the rocks in the same area as you are growing marines, the cement dust can contaminate your water, or you could easily accidentally put a raw rock into a tank thinking it is cured, keep the work areas separate.

Whatever amount of equipment that you have now it is enough to start with, and to grow from. Once you have a number of corals grown out you can begin swapping them for equipment and supplies and as you gain experience and expertise in producing corals you can begin selling them. I stated early on in this series that it is good to develop a working relationship with one or more shops that you plan on doing future business with. You can get a very good idea of the market for corals in your area by studying the prices of the shops that are doing a good volume of business.

Compare prices between shops, and divide the prices by 2-3 times to get an idea of what the shops are paying for their corals. This is a rough ballpark method but will give you an idea of what you will need to be selling your corals at to compete. You WILL have a superior product, if you give them enough time to grow out and develop. Your products being captive raised will already be acclimated to aquarium conditions, and there will be ONE water change from your tanks to the dealers, as against the numerous ones that they experience coming from abroad. Your product will be healthier and stronger as a result. You WILL have a superior product. But, you will still have to compete with cheap shipped in corals. Keep this in mind.

As I said, looking at the dealers prices, and doing some simple arithmetic will give you a good idea of what they are paying for them, do not get the idea that they are 'making a killing', they are not. The old joke in the pet business is that the best way to make a small fortune in it is to start with a big one. It is a tight margined business with a lot of overhead and costs that are not readily visible to the customer. Without the contribution margin of the corals markup they will, and do, go under fast.

So, lets assume that you have visited a couple dozen shops, and have a good idea of what they are buying their corals for. Now, how do you figure out how to make a living from that?

The simplest way is to figure out how much that you want to realistically make from your business. Is it to be strictly part time, or do you want to eventually work it into a full time thing? Or do you just want to grow out enough stuff to swap for the supplies and equipment that you want for a hobby? All are equally valid goals, and all realizable. Each goal can be achieved by estimating, carefully how much that you can produce, with the equipment that you have, and plan on obtaining. First, you really need to know what you want to do, and begin to work towards that. You can start with one tank, and grow from there. If, you are unsure then begin on a hobby level and gain expertise in growing corals while you get the feel of it and decide if this is what you want to do. For sure, if it is not workable for you as a hobby it wont be as a business. But, start somewhere.

Lets look at typical arrays of equipment , and what can be done with them.Lets say that you have a 55 gallon reef tank set up with a variety of corals that you have assembled as a hobby tank. you probably have the basic brood stock that you will need to begin to build a product list of. Some corals will do well for you, some will be difficult. Corals that others have problems maintaining will do well for you, and you wont be able to keep some that others say is a snap. The difference will be water, and your own style of husbandry. Find out what works well for you and concentrate on them.

You should over a period of time come up with a list of 5-10 corals that you can produce regularly and have available to your customers in good condition and sizes. Do not make all of your corals the same size rocks, vary them, offer more small ones then big ones, the small 3-5" rocks sell easier for the stores then the big 20lb specimen rocks. But, have an assortment, and be consistent with what you offer, a small, medium and large rock that is about the same from batch to batch. I sell most of mine in mixed box lots and that works out well for the customer as they get an assortment and it is easier for me to put box lots together. Works well all of the way around.

Now, with your reef tank and the 30 gallon you can begin to gain experience making cuttings and growing them out. You will find that most cuttings take 2-4 months to make a saleable product, so your production from the 30 gallon tank will be somewhat limited. The other thing that you will notice is that the 55 gallon reef tank while lovely to look at, is inefficient in space usage. You will have a lot of space used up by rocks that the corals are setting on. For colony tanks I suggest building racks to hold your corals, they allow more water in the tanks and give you much more efficient use of space. You can make racks of plexiglass, I have some made of scrap pieces of egg crate left over from making plenums. They have shelves of about 4" width, and about 46' long on other pieces of egg crate, tied together with plastic tie bands. I have 4 shelves in a 75 gallon tank that hold about a 100 cutting rocks of various sizes. I can also easily keep 20-30 colonies of various sizes on these racks. This will give you much more efficient use of your space.

Now, if you have a colony tank, you need a place to put your cuttings for growout. I use 2-3 cutting growout tanks for each colony tank. This is what I call the basic production module. With it you can turn out several boxes of corals every 4-6 weeks, depending on the size of your boxes.I have 3 different packs, one box with a large specimen rock, and 10-12 smaller 3=5' rocks, one box with several medium rocks and 8-10 small rocks and one box with 12-15 of the small rocks. There is a variation on this production module that is worth looking at, that is the use of plywood vats, either 4' or 8' long by 2' wide, with 1'' by 1'' in the corners and seams to give more screw space. These are lined with clear plastic or pool lining, I like 46 mil clear plastic. They are 12" deep, and can be stacked 3 high to make a space efficient growout array.

You can grow a LOT of cuttings out in such a vat and this is my unit of choice for coral cutting growouts. I use plain 2" by 4'' s for a rack to hold them and put two 48" shop lites on each 4' rack. If you have enough room make the vats 8' long.For the 4' long vats I use half inch plywood. I went to the 4' by 2' as 3 sheets of 4' by 8' plywood makes 4 of the vats. Somewhat cheaper then buying tanks. But, for colony maintenance I prefer the tanks. BTW, the cheapest way to buy tanks is to watch your classified ads in your local newspaper, or that of the nearest large city, you can buy the sizes that you want very reasonable over a period of time, well below wholesale.

SAVE A REEF, GROW ONE FOR EVERYONE!!!

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