John & Susan Merrell
41390 Hwy 226
Scio, OR 97374
503-551-7219 (cell)
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The Farm Business Plan

A farm business plan must take into account the short and long range plans of the farm's owner. The alpaca industry in the US is maturing and many opportunities exist. To be successful, however, one must be clear on where they are going. (It might be helpful to see our checklist for alpaca owners)

Before developing a farm business plan it is imperative that you fully investigate the industry, it's history and its probable future course. These are necessary first steps to figuring out where your operation will fit into the larger industry. Questions to answer might include:

  • Will your farm be based solely, or primarily, around alpacas, or will they be part of a more diversified operation?
  • Will you be involved in ancillary services (transport, shearing, value added activities, etc.)?
  • What is the maximum number of animals you are prepared to run on your farm?
  • What exactly are you producing (i.e. breeding stock, raw fiber, processed fiber, wholesale or retail finished goods, etc.)?
  • What prices can you reasonably expect for your product, and what margin of profit do you plan to achieve?

Based on the answers to the above questions, you must determine sales projections that allow you to turn a profit. Be brutally honest here. In the excitement of developing a new business it is far too easy to overestimate annual sales and/or profit margins.

In the alpaca industry past or current trends may or may not be relevant. Other exotic livestock breed industries have suffered relatively sudden price reductions. It is important to determine what the full range of prices are for various qualities of alpacas. (Diversification of farm operations may provide some protection from volatility in the alpaca industry.)

It is important to research and consider laws regulating your farm, both locally and nationally. There have been, for example, cases of farms becoming mired down in local zoning ordinances. Transporting of animals across State lines may raise issues with identification, and/or health concerns.

Get to know your competition. Who are the major players in the US alpaca industry? What are the politics taking place in the various industry organizations? On the surface the US alpaca industry is very congenial, but in the end it is a highly competitive environment. You must decide if you will compete head on with established players in the industry (and if so, how), or if you will establish yourself in a niche.

Determine your potential customer base, based of course on exactly what you are producing. Fiber quality animals will sell to a different segment than top quality breeding stock. High end garments to a different consumer than raw fleece. Understand what your customers will demand, and be prepared to offer that.

Establish sales targets that will allow you to maintain profitability. There are advantages to thinking in terms of units rather than dollars. "X units sold will establish profitability," can help to set realistic goals, whereas "needing to make X dollars," may only induce panic.

Setting prices is a function of current market prices and your operational costs. Establish costs for feed, hay, insurance, taxes, mortgages, breeding fees, etc. These in turn must be balanced against realistic prices that you can ask for your products.

Have a detailed plan for promotion and advertising. Far too many alpaca owners have failed to plan for their marketing strategies and expenses, and are sorely disappointed when their animals do not sell themselves. Marketing can be extremely time consuming and expensive. maintain the necessary cash reserves to cover this necessary expense.

Finally, you must detail your plans for transport/shipping and delivery. This includes livestock that you sell, raw fleece, and any value added product that you carry, and both to your customers and processors, and from your suppliers.

Your marketing overview will become one of the most used parts of your business plan. it is extremely important to do this section right, and to keep it updated as conditions change.

Alpaca Sales

"She was very pleasing in her address and modest in her manner, and was clad in a nice, new alpaca. I am certain she could not have made that..."

Robert E. Lee
Recollections and Letters of General Robert E. Lee
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