Warning: Poor Financial Planning Can Kill Your Catfish Farming Business

Planning is an essential aspect of any business venture. This is what some catfish farmers overlook in the course of setting up their farm because they don’t see it as a real business.

Most farmers set up on wrong viability study, by underestimating the amount of capital and cash flow needed to complete a farming season (6 months). In a country where the costs of inputs are not stable due to inflation, there is always a need to prepare for extra costs that may be incurred on increase in cost of raw materials. For instance, the costs of GNC and Soya Meal as at September 2013 to January 2014 were 45 and 70 naira respectively (approximately 30 and 50 cents respectively at the time). In less than 6 months, the price jumped to 90 and 120 naira respectively (approximately 60 and 80 cents respectively at the time). As if that was not enough, the price further went up to 125 and 145 naira as at the time of writing this article. This means that the financial plan or viability report prepared in the first 6 months of the year might not be feasible for the last 6 months of the year.

The effect of poor financial planning goes beyond inability to complete a farming season successfully. It has a great effect on getting back the capital invested, ability to pay back loans and interest on loans as well as ability to meet expectations. Since the aim of every commercial venture is to make profit, any one that wants to build a tower should take time to count its cost. Poor financial planning is an indication that a business will fail even before it starts.

Without any doubt, farmers have a role to play at ensuring viable financial plans. The role of farmers is majorly in the aspect of speculation. At times the price of inputs will go up, and other times it will move down. Farmers should be able to determine when price will go up or down so as to take necessary steps e.g. buying some quantity of raw materials that will be used within a farming season or holding on to take advantage of the price when it comes down. Basically, the price of inputs will come down immediately after the harvest season (October till January). After this period, price will start moving up.

Although there are some situations beyond farmers’ control in the preparation of financial viability plan: for instance, farmers might not be able to control the foreign exchange rate, and bearing in mind that some of the inputs are imported from developed countries of the world. In other to cushion the effect of poor financial planning, catfish farmers should note the following:

• Farmers should determine the number of days their fishes will be cultured before sales.
• Farmers should spread cash flow to cover the number of days planned to culture fishes before sales.
• Farmers should expect inflation of up to 20% within a farming season. This will help them to prepare a worthy financial plan that will stand the test of time.
• Farmers should get up to 80% of capital needed for a particular farming season with the hope of getting the remaining within the first three months of stocking.
• Farmers should be realistic about how much outputs will be bought e.g. if a kg of table-size catfish is being bought at the rate of N550 (approximately $2.75 at the time of writing this) as at the time of drawing the plan, farmers can prepare their financial plan at the rate of N500 (approximately $2.50 at the time of writing this) in case the price goes down.
• Finally, it is better to overestimate the cost of inputs at the point of financial plan preparation than to underestimate.