Alpaca Business Plan

 

Alpaca Business Plan

An alpaca business plan is essential to maximize your profits from your alpaca investment.

From http://www.sweet-creations-alpaca-farm.org

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So, you have fallen in love with alpacas! And now you want them in your life. I can totally relate! But, before starting an alpaca farm, take a deep breath, and spend some time and thought developing your alpaca business plan. It is worth it!

I would like to take a moment first to let you know that I am not an accountant, and I do not play an accountant on TV either. So, please review your farm business plan with your accountant for specific advice for your situation. It would also be a good idea to obtain legal advice as needed. OK?

One of the first decisions to make is whether to pursue a hobby farm, an alpaca investment, or an alpaca business.

Hobby farms are just hobbies. And hobbies are just expenses. But they can be worthwhile expenses if you immensely enjoy them. How much is it worth to hug an alpaca every day? Priceless! Alpacas can make really cool pets.

An alpaca investment can be a lucrative opportunity. In general, you provide the capital for a dam or herdsire while an alpaca owner provides most everything else – knowledge, decisions, care, equipment, supplies, etc. Then, you share the profits from cria sales or stud fees or whatever in a pre-determined manner. There are many variations of this concept. Your contract will specify your particular arrangement.

However, most alpaca owners have an alpaca business since they are either showing a profit in 3 of 5 years, or have a well-defined profit motive.

You have various tax advantages when you have a real business. First, you are able to deduct your business expenses. And you can depreciate your alpacas, too. Your alpaca assets compound themselves from year to year, but you do not pay capital appreciation taxes until you sell an alpaca. Alpacas are even fully insurable against loss with alpaca insurance.

The IRS publication #225 entitled The Farmer’s Tax Guide contains essential tax information for you and your accountant. Section 179 allows for direct write-off of certain expenses at an accelerated pace for some situations.

Your alpaca business plan should define your business niche. Not every business can be everything to everyone. A niche is your little piece of the alpaca world where you can excel and prosper. You need to know why you want an alpaca business.

Let’s look at some specific ideas for an alpaca business niche.

 

  • Perhaps you want a fun fiber farm where you raise alpacas for their fleece and for fiber arts.
  • Perhaps you desire a cute and quaint alpaca product store.
  • Perhaps you want to breed a little and sell a little with a small alpaca farm. Most alpaca farms consist of just 10 – 15 alpacas.
  • Perhaps you want to lease your dams in a rent-a-womb program.
  • Perhaps you already have an existing farm, and want to explore farm diversification and other streams of revenue.
  • Perhaps you are a city dweller, but want to board or agist your alpacas at a local farm while you manage the rest of the alpaca business.
  • Perhaps you want several foundation dams and several prominent herdsires so that you can produce alpacas for alpaca shows.
  • Perhaps you are really macho and only want machos for your herdsire stud service.
  • Perhaps you have a heart for alpaca rescue.
  • Perhaps you want to position yourself to become a leader in the alpaca industry with a large alpaca operation.

 

Perhaps you want to provide ancillary services to the alpaca industry:

 

  • Shearing
  • Fiber Skirting and Grading
  • Fiber Processing
  • Fiber Arts
  • Transportation Services
  • Boarding
  • Farm Sitting
  • Broker
  • Alpaca Training
  • Show Services
  • Animal Assisted Therapy
  • Equipment Supplier
  • Photography
  • Software Systems
  • Consultant
  • Judging

 

I have just listed some possibilities. Of course, you can mix and match these ideas to obtain the best alpaca business niche for you. Do your research! Get creative! Think outside the barn!

Now that you have a nice niche, you should develop your mission statement. This statement is a one-sentence purpose for your alpaca business. This simple sentence is foundational for your alpaca business plan. The next step is to list several goals related to your mission statement. What do you need to do by when to fulfill your mission? Then, you need to develop specific steps that define how you will reach your goals.

Now, let’s discuss the financial plan section of your alpaca business plan. Profit is simply revenues minus expenses. You need to maximize revenues and minimize expenses in order to have a successful alpaca business.

In the alpaca industry, it takes awhile before those revenues start rolling in. Most alpaca owners do not sell their first alpaca for several years. You must build your herd and let potential customers know that you even exist. So, I suggest that you be conservative with your income estimates.

Expenses are higher during the first year or two while you are starting an alpaca farm. These start-up expenses include items related to alpaca farming and your alpaca supplies. Of course, many start-up expenses can be depreciated in a favorable manner. Make a list of all other items that you need as well as their associated costs.

Also, include a budget for the purchase of your ideal alpaca starter herd for your niche. Alpaca prices are primarily based on alpaca quality. You only want to purchase alpacas that match your niche.

Often, new alpaca owners forget to include expenses for alpaca marketing in their analysis. Marketing is a huge part of alpaca businesses. Your marketing plan should include ideas for anything that you want to sell – alpacas, services, products, etc.

I suggest that you lay out your expected revenues and expenses on a spread sheet by year or even quarterly. Include a row for expected profits by subtracting expenses from revenues.

The first few years, you will most likely have a negative balance. By adding up these negative balances, you can figure out how much capital you will need initially to cover start-up expenses and to sustain your farm while you wait for the revenues. You can also discover when you are likely to start making a profit from your alpaca business.

If you do not already have enough start-up capital, you can obtain a farm loan or a small business loan. When you apply for these loans, you will most likely need to submit your detailed alpaca business plan to the lender.

Also, many alpaca owners will allow installments and/or interest-free purchases of alpacas.

You should thoroughly understand alpaca risks in your alpaca business, and know how to minimize these risks.

Your alpaca business plan is meant to be a living tool as opposed to an antique treasure.

Periodically review your alpaca business plan. Determine what is working well and what is not. Feel free to make adjustments as needed. Add new goals and new steps. Delete other goals and steps. Living business plans are meant to change in order to work for you.

I wish you the best as you develop your alpaca business plan!