Commercial Aquaponics – The commercial viability of aquaponics is likely the hottest contested topic on most aquaponic forums today and is the million dollar question that everyone wants answered. While I’m still not willing to make my financial data public (you would be amazed how many people have asked), I will say that we are indeed a profitable farm based on revenue generated by the farm alone. Although our farm’s revenue is derived in diverse ways, even after extracting any non farm related revenue from things such as consulting, education or system sales, our Green Acre farm is indeed profitable on it’s farm generated merits alone. So it then begs the question, why have alternate streams of revenue if farming alone can be profitable? For several reasons. Let’s take a look at each one.
Reason 1 – A business with multiple revenue streams is a more viable, resilient business model. Having multiple revenue streams means a business can be more nimble and weather setbacks more easily. Literally. Setbacks from the weather are a very real possibility and probability for any kind of farming venture unless you farm in a controlled environment setting but even in controlled ag, crop losses can occur due to pest damage or disease. However having multiple streams can help insure there is still cash flow when a crop loss occurs. This is especially important for the aquaponic farmer as crop insurance isn’t yet an option. When it comes to diversifying revenue though, even our traditional farmer friends follow the same model or at least the ones are that are still farming. In the last three years we’ve watched two local traditional small farms go under. And guess what those two farms had in common? Neither had alternate streams of revenue and when they experienced farm related setbacks, they had no alternate means to buffer the low points. Even the state of Florida Dept of Agriculture recently implemented a program to make funds available for small farms to build their agritourism focus or programs as the state has recognized that there is a need for small farms to diversify.
Reason 2 – Direct farm generated revenue from crops is rarely a consistent amount and alternate streams can supplement in between crop harvests and rotations. This actually is probably a little less true in aquaponic farming then in traditional Ag where all of a farms revenue might come in a two month period when the watermelons are ready to harvest. For we aquaponic farmers though, a carefully planned crop schedule and rotation can help insure a constant and consistent harvest of some crops such as lettuce and herbs but even the revenue generated by these will fluctuate with the weather and season. Other crops that are more seasonal in nature or take a longer period of time before producing might mean a 60 day or longer time frame before it will generate revenue as opposed to the crop that can produce on a constant rotation. So what do you do when nearly 25% of your system is tied up in production but not yet producing a harvestable crop? Wait and rely on your alternative streams of revenue!
Reason 3 – Alternate streams of revenue can subsidize a small farm business while it grows its operation to a size large enough to generate enough revenue on farm sales alone. Ah, now this is the ultimate goal for us and most likely for most aquaponic farming hopefuls; have a farm large enough to pay all the bills and then some. It’s not that the farm is unsuccessful or not profitable right now but its simply not large enough yet to produce enough revenue to support two individuals entirely. Understand though that this is purely a function of not having enough start up or expansion capital for a small farm business to create a large enough farm right out of the gate. However, just because a farm’s revenue is limited due to grow space and production does not mean it’s not a profitable business.
Reason 4 – Alternate revenue streams can self fund farm growth and expansions. Lets face it, expanding an aquaponic farm can be pricey and certainly more then its soil counterpart. Have we stumbled on the one drawback of aquaponics? Perhaps, but I will save that discussion for another blog but adding on additional grow space can easily incur a capital outlay of $20k or more or as little as $15 a square foot just for the system or as much as $100 a square foot depending on how you build and source it. We would have to sell an awful lot of lettuce to fund expanding our farm from direct farm sales. Quite honestly, this is the single greatest driver for our alternate streams because our goal is to have enough grow space for the farm alone to support itself and us and so far 100% of our expansion has been self funded from alternate revenue streams.
Now that we have ascertained that commercial aquaponics farming can be profitable, it brings us to the other side of the million dollar question. What then is the key to operating a profitable farm business and how much farm does one need to be profitable? Really, the answer to that is any size. A 1000 sqft farm can make a profit however will that profit be great enough to be a viable business? In many cases that answer may be no, however factors such as market considerations, crops, clientele and location can make a tremendous difference in that 1000 sqft venture being being viable or not. The greatest factor though is economy of scale. If a 1000 sqft system will produce “x”, then a 4000 sqft system should conceivably produce “4x”. Of course there are labor and material variables that will affect the bottom line but to keep things simple, we will maintain the above formula. We know what revenue we can generate at our current square footage and what the inputs are for that square footage and we therefore know what we could produce at twice that square footage. The profitability is still there even when we increase operational size and overhead inputs.
As to the question of how much revenue a farm can generate, I can not answer. Well, I can answer how much my farm can generate but folks generally want a one size fits all answer to this question and it is one I will never answer because I nor anyone else can without knowing multiple inputs. There are far too many variables that must be considered in this equation and all are specific to one’s own location, market and farm plan. How does one then make an informed decision about an aquaponic farming venture? This is actually one of the tools we empower students with that attend our GA Complete Course. Partner JD Sawyer of Colorado Aquaponics has developed a unique interactive financial modeling tool where prospective farm owners can project revenue based on inputs they can derive from their own market and conditions and their own business plan, not someone else’s miles away. No one can answer this question for you and those that claim production or revenue numbers for their systems cannot accurately do so and are simply projecting unrealistic and unproven numbers unless they know the correct variables for your particular situation to plug into the equation. That is why we supply our students with the tools and metrics to generate those numbers themselves.
At Green Acre, we know that commercial aquaponics farming absolutely can be viable, however we also know it takes several key pieces to run a successful farm business. First and foremost, one must obviously have a very good understanding of aquaponics and system operations but also understand the ins and outs of marketing and advertising and be capable of efficiently managing a small business. We touch on all of these things in our GA course and it comprises a four day, jam packed interactive session but if I had to say what’s at the tops our list for managing a successful commmercial aquaponics farm, this would have to be it:
- Get an education. No matter how fun, innovative and cutting edge aquaponics is, this is a business. Do your research and get informed and be willing to invest in your farms future.
- Diversify! Not only revenue but what you grow. More crops translates into more business.
- Hybridize. Incorporate multiple systems to maximize your crop variety and efficiency of your farming operation.
- Set realistic goals. Don’t jump into a farm venture with no capital in reserves and expect it to pay your bills in a few short months.
- Sell, sell, sell! And do that before you grow it! Become very familiar with your market and build a tribe with your community.
- Always err on the side of caution. Both JD and I will always paint a conservative picture of the potential of these systems and small farms. It’s always better to exceed conservative estimates then fall short on over zealous ones. It also will help insure success.
- Last, minimize overhead. Our philosophy here is simple. Overhead should and can be minimized as much as possible without compromising productivity. Also be sure that your model will be viable if you have to factor in significant overhead costs form things such as lighting or heat.
So there it is. Is commercial aquaponics farming viable? YES! Will every farm survive? Unfortunately no. Let’s not forget that this is a business and more then a third of all businesses will fail within their first two years. That’s not to say though that in these cases it was the aquaponic farming element that failed, whereas we can be pretty certain the business side of it did. The short answer is yes, it is indeed doable; you just have to do it right.