A Business Plan: Crab Farming
INTRODUCTION
1|Page
A Business Plan: Crab Farming
1.1 Origin
This report has been prepared as a requirement of the course Entrepreneurship. The report is on A Business Plan: Crab Farming which was assigned by A.K.M. Saiful Majid, Course-Instructor of Entrepreneurship, Institute of Business Administration, University of Dhaka.
1.2 Objectives
The purpose of this report is to get an exposure to the real world situation of entrepreneurship and businesses in Bangladesh. This study will give me the opportunity to experience businesses businesses are done in Bangladesh and how innovative ideas for business business p lan can be implemented in the real life scenario. 1.3 Scope
The scope of the report is limited to the opportunities associated to the business, Crab Farming in Bangladesh. Thus the concentration has been given to those parts only. The report covers the whole plan including financial plan, marketing plan, management and projected profit of the business plan.
1.4Methodology
The entire study took place in the following following stag es: y
Going through the secondary mat erials to devolop a better understanding business
ventures in Bangladesh, and the secondary sources include: Business related websites, magazines, national and international newspapers, journals. The study requires a systematic procedure from selection of business plan topic to final report preparation. To perform the study information sources are to be identified and collected, they are to be classified, analyzed, interpreted, and presented in a systematic manner and key points are to be found out. This overall process of methodology is given below in the form of flow chart we have followed in the study.
2|Page
A Business Plan: Crab Farming
1.1 Origin
This report has been prepared as a requirement of the course Entrepreneurship. The report is on A Business Plan: Crab Farming which was assigned by A.K.M. Saiful Majid, Course-Instructor of Entrepreneurship, Institute of Business Administration, University of Dhaka.
1.2 Objectives
The purpose of this report is to get an exposure to the real world situation of entrepreneurship and businesses in Bangladesh. This study will give me the opportunity to experience businesses businesses are done in Bangladesh and how innovative ideas for business business p lan can be implemented in the real life scenario. 1.3 Scope
The scope of the report is limited to the opportunities associated to the business, Crab Farming in Bangladesh. Thus the concentration has been given to those parts only. The report covers the whole plan including financial plan, marketing plan, management and projected profit of the business plan.
1.4Methodology
The entire study took place in the following following stag es: y
Going through the secondary mat erials to devolop a better understanding business
ventures in Bangladesh, and the secondary sources include: Business related websites, magazines, national and international newspapers, journals. The study requires a systematic procedure from selection of business plan topic to final report preparation. To perform the study information sources are to be identified and collected, they are to be classified, analyzed, interpreted, and presented in a systematic manner and key points are to be found out. This overall process of methodology is given below in the form of flow chart we have followed in the study.
2|Page
A Business Plan: Crab Farming
Flow
chart of methodology:
Selection of business plan
Identifying information sources
Collection of information
Classification, analysis, interpretation, and presentation of information
Findings of the study
Final report preparation
1.5 Limitations
I faced some limitations while preparing this report, among which is making textbook knowledge knowledge compatible with real life scenario while talking to the organization, whi ch was sometimes disappointing. Again, this report is the first of its kind prepared by me. This also proved to be a limitation. The main limitation of this report would be the lack of organized data. Data that were collected from various sources took a lot of time that restricted collection of any further information. This might have restricted the chance of gathering important primary data that could be collected through interviews.
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A Business Plan: Crab Farming
COMPANY OVERVIEW
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A Business Plan: Crab Farming
PRODUCTS
7|Page
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(Scylla Serrata) and culture them.
Primary focus will be placed on th e breeding andrearing processes to ensure the highest quality using the most efficient system possible.
SS will also off er live and frozen mud crabs of high quality. Live mud crabs will be off ered in batches of 100 gs in both 400 and 500 grams per piece categories. z
Frozen mud crabs will be off ered both in plate freezing in numbersand IQ F(Indi vidual Quic Freezing) formats. The compan y plans to start production of {
frozen crabs from the third year of th e initial venture.
All the produ cts will be h ealth y and free from diseases. Th e company will provide th e lo cal crab farmers with crablets.
8 P
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k
A Business Plan: Crab Farming
MARKET ANALYSIS
9|Page
A Business Plan: Crab Farming
4.1 A comparison of development opportunities for crab and shrimp aquaculture in southwestern Bangladesh
The study area lies 300 km southwest of Dhaka, Bangladesh on the coastal plain at the apex of the Bay of Bengal a nd covers approximately 14,000 km. The area lies between 21j30V and 23j15V North and 89j00V and 90j00V East and includes the worlds largest continuous mangrove forest, the Sundarbans, estuarine marshlands and numerous rivers, canals and their tributaries. The terrain is relatively flat; the elevation ranges from sea level to 5 m above mean sea level. Fisheries play an important role in the regional and national economy and the area is one of the most promising for aquaculture. The fresh and coastal water resources are the most abundant in the country. The presence of the worlds largest continuous mangrove forest provides food source and nursery for the offshore fishery, protection of the coasts from storm surges and cyclones, domestic and commercial products, recreation and tourist services, and habitat for shrimp and other cultivable species. Culture of freshwater and marine fish, shrimp and other crustacean species are highly important as they can be easily integrated with other activities such as agriculture and livestock rearing. Bangladesh has extremely favorable conditions for crab farming and shrimp culture, not least because of the low production costs. In 1982 1983, there were only 5200 ha of land under shrimp culture; by 1996, 110, 000 ha had been brought under shrimp cultivation, 70 |
being located in the Khulna region. By contrast, mud crab S. serrata has been an incidental }
~
product arising from the culture of shrimp, prawn, and milkfish in Southeast Asia.
4.2 Market Demand and Segmentation
For the last five years, aquaculture contributed more than 30
|
of the worlds total
production of fisheries product. The growth rate of worldwide aquaculture is very rapid > }
10
|
per year for most species while the contribution to the total from wild fisheries has ~
been essentially flat for the last decade. The rapid increase in the demand for seafood has created a new market for seafood products like shrimp, lobster, crab etc. Statistics say that Malaysia alone imports 2 tons of crab every day. This indicates a growing market for the company. In fact, the demand of Crabs in the international market is so high that Bangladeshi exporters can hardly meet it.
SS targeted the market into different segments. As a result it will offer three different products. They are targeted towards different geographical locations. The product with the 10 | P a g e
A B
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:
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most demand is live crab, but The Company is onl y targeting the Asian crab market with this though the US and EU is a huge market as well. However, due to problems such as Flight
schedul es and time involved, the product cannot reach the market.
4 3 Competition
SS will face strong international comp etition but almost no competition in the country though both are di scussed b elow: Comp etitors in Bangladesh: In Banglad esh there is no crab farm. So, there is a practice going on like collecting crabs by fishermen and some other peopl e unoffi cially and if those crabs meet the quality in weight then those are sold or e ported. But there is no scientific method
for breeding crabs or collecting. So, SS will face almost no domestic comp etition. Comp etitors
Abroad: As
the company is targeting the world crab market, the comp etition
will also be global. The ma jor competition would be from countri es like China, Indonesia, Philippines and India. These countri es have a set distribution chain and ar e e porting at a
much larger scale. Even after using scientific methods to fatten crabs, they too are depend ent on nature for their crablets, making it th e ma jor bottleneck in producing crabs.
Figure: Suitable land for crab farming P
A Business Plan: Crab Farming
MARKETING PLAN
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A Business Plan: Crab Farming
5.1 SWOT Analysis
Strengths Practice of Scientific method; Existence of dedicated breeding farm; Strict quality control; Strong preventive measures against diseases.
Weaknesses Limited production capability; Transport delays may result in loss of shipment.
Opportunities Nonexistence of bred crablets in Bangladesh; Better size and quality of products; Incorporating newer and better technologies in our processes.
Threats Lack of flights available to destination countries; Natural disasters; Outbreak of diseases.
5.2 Marketing Strategy
5.2.1 Target Market
Scylla Serratas target market is East Asia. The countries of this region like China, Japan, Taiwan, Korea,
ong Kong, and Malaysia are the main target. This targeting has been done
following g eographic segmentation.
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A Business Plan: Crab Farming
5.2.2 Pricing
The main strategy of the pri cing of the firm is to provide high quality with medium price thus maximizing sales. The pricing strategy will vary according to various regions and acc ording to competitive advantages. 5.2.3 Promotion
The Board of Directors has detected promotion as the main competitive tool and wants to emphasize on it a lot. For that reason there will be a huge budget allocated in this sector and this investment is very much justified. In promotion of a service industry, the main effective tool will be percentage -of-sales. As our sales increases, SS will attract new clients and capture new markets. Consequently, additional promotional activities will be carried out which would increase the promotional budget. Since the customers of SS consist of buyers, the business will adopt integrated direct marketing in order to promote its crabs. The business will send brochures through fax and e-mails, have its own website where orders can be taken online, and contact its clients through telephone or e -mails to m aintain a profitable client-producer relationship
The firm will also rely on ads in newspaper and magazines, billboards in selected areas. The other facilities, specially the grooming facility will be advertized heavily in the newspaper. Television ads will be very nominal as it has been found that there is little impact of television ads for this industry. But the firm will look for publicity for the various promotional plans.
5.3 Distribution Channel
The distribution channel of Scylla Serrata consists of fisherman, arotder wholesaler , bapari
intermediary , and finally exporter. The company will also follow direct marketing in some
cases, so that it can cut costs by eliminating the intermediaries.
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A Business Plan: Crab Farming
ORGANIZATIONAL PLAN
1 |Page
A Business Plan: Crab Farming
6.1
Ownership
Scylla Serrata is going to start up with the partnership of Mr. Khaleque and Mr. Shahed. Both of them contributed BDT. 2,700,000.00 and additional loan has been taken from the bank with an interest tate of 15. 5%. So, the ownership is of the business will remain in the hands of these two partners. The main clauses of the contract include: The owners will provide capital equally. Profit will be shared in the ratio of the capital invested by each owner. In case of any partners inability to participate, his successor may take control of his
shares and the partnership will continue with the previous deed. All decisions will be taken democratically. The CEO will be elected in a democratic order from the owners. The CEO will receive a pre-determined salary for his service to the business along
with profit.
6.2
Organization
Scylla Serrata will be a partnership. Investors will be treated as shareholders and therefore will not be liable for more than their individual personal investment.
An organization structure is effective if it facilitates the contribution of individuals in the attainment of enterprise objective. The application of the principle of unity implies of course the existence of formulated and understood enterprise objective. As the companys objective is to make profit over a period of time, the organization pattern that will help to accomplish this conforms to the principle of unity of objective.
In looking at organizing as a process several fundamental inputs must be considered. In the first place the structure must reflect objectives and plans because enterprise objectives derive from these. In the second place the structure must reflect the authority available to enterprise managers. In the third place organization structure like any plan must reflects its
1 |Page
A Business Plan: Crab Farming
environment. Fourthly the organization must be staffed with people. Obviously the activit y groupings and authority provisions of an organization structure must take into account peoples limitations and customs. The internal management of this company is developed keeping in the above-mentioned matters into consideration.
6.3
Personnel Plan
Scylla Serrata consists of production department and sales and promotional department. The personnel plan is given below:
Production
No.
Manager L abor
1
full time
18
Mechanic part time
Security
2 4
Sales and Promotion
Manager Accountant Assistant Staff Security
Sub Total
25
Sub Total
No.
1 1 1 10 4 17
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A Business Plan: Crab Farming
PRODUCTION PLAN
1 |Page
A B
i
Pl
:
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7 Produ tion
7-8days
Mother Crab/ Brood stock
Larvae (id entifi cation period)
Larvae
incubation (78days)
Fattening (2025days)
Crabl ets (180200gms)
Crabs >500gms
2 months
Export
Figure: Production Process
7 1 The produ tion pro
ess
7 1 1 ood produ tion
Mud crabs f eed on phytoplankton and zooplankton. The first step tophytoplankton cultur e is obtaining an algal starter from laboratories or institutions that are selling them. Chlorella, Nannochlorop sis, and Tetraselmis are the commonalgae. We start culturing them in one-liter capacity bottles. When th e phytoplankton has bloomed and the density is 3 to 5 x 105 cells/ml, we transf er th em to ten-liter carboys. Upon reaching the same density, th ey are transf erred to a 0.5 to 1 ton- tank where they are allowed to bloom mor e. In culturing phytoplankton, the water temperature is maintained from 20-25 °C for indoor
culture and good aeration is provid ed to give enough supply of carbon needed for plant growth. And filtered seawater with a salinity of 25-30 ppt is used for the culture and sterilize all the containers before use.
Also,
for bigger culture, ur ea (21-0-0) and ammonium
phosphate (16-20-0) is used to supply the essential nutrients needed by the algae.
P
A Business Plan: Crab Farming
7.1.2 Rearing of larvae in nursery
The nursery tanks are lined with soil 10 cm thick inoculated with lab-lab. For large tanks,
they are lined with mud substrate that has been seeded with lab-lab.
Lime
and chicken
manure at 2 kg 10-ton tank and ammonium phosphate at 500 grams per tank is applied. ª
After fertilization, the megalopae is transferred at a density of 20,000 to 30,000 per cubic meter. Organic fertilizer is applied to encourage the lab -lab to bloom.
Sou
«
¬
: A guid t o hatchery and nursery pr oduct ion of mud cr ab ( Scyll a serr at a) j uv eni les
by Romeo F ortes, Jul iana Bayl on , E v ely n Mar asi gan , All an F ai la man ,
7.1.3 Crab fattening
Unused fishery products such as Shrimp heads, trash fish, wheat are used as feed for crab fattening. The fish are cut into small pieces and given to the crabs once a day every evening. The amount of feed given is 10 % of body mass.
7.1.4 Broodstock management and spawning
The major source of broodstock is the wild-caught post juveniles or half-grown crabs while adult or berried female crabs are used as spawners. A minimum weight of 200 to 300 grams for broodstock and 450 grams for spawners are d esired. The king crab is sexually matured when the width of its carapace reaches 1 4 cm and it weighs 450 grams while the other mud crabs can spawn even if its cara pace is still below 10 cm and weigh 300 grams. As soon as the broodstocks and spawners of the king crab arrive at the hatchery- they are placed in the tanks at 300 spawners per tank and 1000 broodstocks per tank with a 10 cm sand substrate at the bottom. They are fed daily with shrimp head and trash fish at 10 % of their biomass. The water is changed at least 30%), the sides scrubbed of the tank and ®
excess feed removed daily. Mud crabs become mature and mate when they are 4 months old. In ponds or tanks, male and female crabs clasp for 5 to 7 days to fertilize the eggs. There are two methods of spawning: the natural and the induced. In the natural method, the mud crab is left in the tanks until they become sexually mature and spawn.
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A Business Plan: Crab Farming
Since ablation increases the appetite of the mud crabs, they are fed more until the eggs are hatched. Incubation ranges from 7 to 13 days. At this time, the berried pregnant) crabs are ¯
transferred to another tank without the substrate. The eggs are expected to hatch when the eggs turn from light orange to dark grey After the eggs are hatched, the larvae are transferred into the large tanks filled with 5-10 tons of filtered seawater with 3 4 ppt salinity. Algae and rotifer is added at a rate of 5 x 10 3) ¯
cells per cubic meter and 25 ind ml, respectively. They are kept here for another 7 -8 days °
7.1.5 Fattening pond readying
Ponds specific for fattening have to be at least 1 meters deep. 1 Bigha or 40 square meters of land is used for a single pond.
G is using 20 ponds round the year in different time
±
periods to keep production steady. These ponds are readied before every harvest. The sides are partitioned with bamboo with up to 20 centimeters underground. Lime is applied to control the alkalinity of the water. P
±
level is kept between 7 and 8. Manure is used on the
ponds on the basis of 500 Kilograms of cow dung, 20 Kilograms of Urea and 10 Kilograms per ector. Salinity level is maintained between 10 -12 PPT. ±
Element
L evel
Salinity
10-22 PPT
Temperature
22-28 Degrees
Oxygen
>4-8mg liter
CO2
0.04-10
²
mg liter ²
P
±
Ammonia
6. 5-8 <0.02 mg liter ²
Nitrate
0.1 mg liter ²
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A Business Plan: Crab Farming
7.1.6 Crab fattening
The crablets weighing 180-200 grams are stored in the fattening ponds of 40 squire meters at a density of 2 per square meter. Though denser fattening is possible, this provides better growth. Using a smaller density will result in a wastage of space. Proper feeding with 10 % of body weight takes about 20-25 days for the cr abs to reach full size. Using different ponds for male and female and proper feeding eliminates cannibalism among the crabs. Measures are taken to prevent viruses and other diseases. Chlorinated water is used in the ponds.
7.2 Capturing and Transport
When the crabs are full grown, they are captured. Whole ponds are captured at once. Their claws are tied on the spot and they are brought to the work area for cleaning and packaging. They are carefully packaged into plastic baskets so that too much pressure is not put on them. 25 Kilograms of crabs are pac ked into each baskets. These baskets are transported to the sales and promotion office in Dhaka. Transportation is usually done during night. The temperature at that time is better suited for crabs and mortality rates for transportation is drastically reduced.
7.3 Export
After sending the consignment from the farm, it is received in Dhaka office in next day morning. Then the goods are sorted as per order of the buyer. Certain grading systems are followed to sort the crabs. Then they are packed using the preferred packaging instructed by the buyer. For packaging option plastic box, foam box and bamboo boxes are used. After finalizing the packing, the consignment is sent to the airport using pick-ups. It is received the product there necessary actions taken for the shipment procedure including duty, loading etc. After receiving the shipment, the client will inform
³
G about the mortality rate and then the
sales figures are adjusted.
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A Business Plan: Crab Farming
FINANCIAL PLAN
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A Business Plan: Crab Farming
For the financial plan for Scylla Serrata, I have made some k ey assumptions:
Tax rate: For 80% -100% export oriented businesses govt. issues a 5 year tax holiday; Salary growth rate: 10%; Mortality rate: 32%; Inflation: 10%; Interest rate: 15. 5%; Almost all the costs are adjusted to the inflation rate; As most of the insurance companies are not willing to insure against natural disasters in fisheries sector, a provision has been kept to adj ust any loss incurred due to disasters; Discount rate: WACC 17.86%. Cost of goods manufactured and balance sheet for four years are given in the appendiz. WACC is calculated below:
Particular
Cost
of Particular
Amount
Equity
20%
5,400,000.00
Debt
15. 5%
4,900,000.00
Value WACC
10,300,000.00 17.86%
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A Business Plan: Crab Farming
8.1 Startup Costs
Start up costs account for a total value of BDT 10,300,000.00.
Initial Investment Initial Costs
Start Up Tools Utility Setup Legal Charges Decoration Web Development Weight Machine License Fee Total Initial Costs
BDT BDT BDT BDT BDT BDT BDT BDT
20,000.00 35,000.00 50,000.00 125,000.00 10,000.00 5,000.00 3,200.00 248,200.00
BDT BDT BDT
300,000.00 100,000.00 400,000.00
36 Bigha, 250,000.00 per Bigha
BDT BDT BDT BDT
8,750,000.00 100,000.00 50,400.00 8,900, 400.00
3 rooms, 1 toilet, hatchery
BDT BDT BDT BDT
292,000.00 50,000.00 60,000.00 402,000.00
BDT BDT BDT BDT BDT
40,000.00 60,000.00 25,000.00 120,000.00 245,000.00
Electricity, Internet, Water Lights,
Glass Partitions, etc.
5 pc, 1,000.00 per piece
Assets Needed
Current Assets Cash Rent Total Long-term
Assets
Land
Acquisition Development Fencing Total Bui ld ing Building Decoration Tanks Total Machinery Oxygen Pump Ultra Violet Ray Machine Pump Machine Generator Total
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A Business Plan: Crab Farming
F ur ni tu re incl uding offi ce fur ni tu re Chair Table Fan Furniture-office Chair-executive Sofa Table Fans Air Conditioner Cabinet Total
6 pc, 2,000.00 per piece 3 pc, 5,000.00 per piece 3 pc, 2,000.00 per piece
BDT BDT BDT
12,000.00 15,000.00 6,000.00
BDT BDT BDT BDT BDT BDT BDT
7,000.00 18,000.00 12,000.00 4,000.00 25,000.00 5,400.00 104,400.00
Total Assets Needed
BDT
10,051,800.00
Total Required
BDT
10,300,000.00
Double seated 2 pc, 6,000.00 per piece 2 pc, 2,000.00 per piece 3 pc, 1,800.00 per piece
8.2 Startup Funds
The startup funds are collected from the investment of the two partners and borrowing from the bank. Below is shown the startup funds: Sources Loans
BDT
4,900,000.00
Mr. Khaleque
BDT
2,700,000.00
Mr. Shahed
BDT
2,700,000.00
Total
BDT
10,300,000.00
Capital
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A Business Plan: Crab Farming
8.3 Break-even Analysis
The following chart and table summarize our break-even analysis. We expect to reach break-even a few months into the second year of business operation. In the 21st month we open, we may achieve goal and break even
Sales Variable Expense CM Fixed Expense Net Income
¶
4,158,000.00
100%
2,877,781.25)
69.21%
1,280,218.75
30.79%
-758,561.67 521,657.08
CM Ratio Break Even
31% TK. 2,463,719.00
Although the net income may rise at a slow pace with an increase of sales due to low CM Ratio of 30.79% , it shows that SS is a very stable business and it is less vulnerable to downturns during any unfavorable circumstances. The break-even assumes variable costs of 79 % percent of sales. This assumption is probably too high, and therefore conservative. Since the With initial monthly expenses of over tk. 758,561.67 we will need averaged monthly revenues of about tk.117,319.95 to break -even.
NPV IRR
Tk. 6,298,143. 50 47%
Payback
1.73 years
Discounted Payback
2.2 years
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A Business Plan: Crab Farming
8.4 Ratios
Main Ratios
Year 1
Year 2
Year 3
4.86
5.86
3.37
Quick Ratio
4.6 4
5.66
3.15
Profit Margin on Sales
16%
15%
15%
Equity Ratio
2.31
3.95
7. 54
11.90
12.70
13.00
Total Asset Turnover
1.49
1.35
1.69
Interest Burden
13%
10%
5%
ROA
28%
25%
23%
Current
Ratio
Accounts Receivable turnover
8.5 Loan Amortization Schedule
Total Loan Interest Rate No. of year Year 1 2 3 4 5 6 7 8
Interest 759500.00 705176.32 642432.48 569963.3 4 486261.48 389585.83 27792 5.46 148957.73
4900000.00
15.50% 8 Principle paid 3 50475.33 404799.01 467542.85 540011.99 623713.8 5 720389. 50 832049.87 961017. 59
Balance remaining 4549524.67 4144725.66 3677182.81 3137170.82 2513456.96 1793067. 46 961017. 59 0.00
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A Business Plan: Crab Farming
CONCLUSION
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