Aquaponics for Profit – The Real Cost

Failed Aquaponics

Not everyone that starts out with good intentions gets to where they want with farming.  Especially those looking to get into aquaponics for profit that are told for next to no effort (2 hours a day) they can make $1500 (gross) per week and only invest as little as $50,000.  While it might be possible, it is not quite that clear cut.

These start-ups are usually troubled by poor designs sold by slick sales pitches on videos that promise extravagant returns for very little investment.  They will tell you it is easy and anyone can do this and make a small fortune.  While you might make some money, the amount of effort required is severely understated.

There is always risk to farming ventures and integrated aquaculture “aquaponics” and aquaculture are no different.  For those getting into aquaponics specifically for profit, these over the top claims of returns do very little to assist those wanting to be successful and make some coin for their families.  They do however, encourage start up failures and reduce industry investment.

Take out of the picture for a minute, the flawed designs, with redundant  equipment, inefficient layouts outs and focus on the money.  Sure I can skew the numbers to make my point, but I prefer to enter over estimating the cost and underestimating the returns, so any improvements increase the bottom line.

Aquaponics for Profit: An Example

Let’s look a hypothetical example which is not much different to the aquaponics plans we published (noting it is not a financially viable system here in AU):

4000 litres of recirculating aquaculture tank system running 2200 plant holes at full production which does not take into account start up commissioning time.

Firstly, 4000 litres of fish tanks will not produce anything worthwhile in terms of business or making you money.  Even if you stocked the tanks with one batch it will only produce 100 to 120kg of fish per year, if you are lucky.  This makes for a very expensive nutrient distribution system with the 100 to 120kg per year making you perhaps $2000 turnover.

Now, the 2200 holes in a hydroponic system, which is roughly 90m2 of growing area if you have your hole spacing right, in this case sitting inside 450m2 poly tunnel.  This will net you about 25,000 plants per year if you have no growing issues or unsaleable product, which is highly unlikely.

I have seen advertisers of such systems suggesting you can get up to $1.50AU per plant and even as high as $3.00AU.  Let’s take the lower value just to be on the safe side and we want to believe them.  You could be lead to believe you might turn over $37,500 per year revenue on the plants alone.

With a $40,000 turnover per year, it might look like a good income for a single person without too much debt.  But is this really aquaponics for profit?

What is the cost?

Some of the major capital you might be looking for (not our prices..):

  • Poly tunnel – $30,000
  • Fish shed – $15,000
  • Aquaculture system – $20,000
  • Hydroponic system – $10,000
  • We have not included development applications and fees for construction.
  • Total – $105,000

Operational overheads

  • Cost of fish production at $8/kg – $960pa
  • Cost of plant production at $0.15/plant – $3750pa
  • The big killer if you borrow over 10 years at farm interest rates – $16,800pa
  • We have not included vehicle costs (fuel, insurance, rego etc)
  • We will not include licensing, permits and audits or stock and equipment insurance (often 4% of capital or turnover) either

That is about $21,500 cost per year leaving you with $18,500 before taxes.  We are going to assume your business makes no profit (well it doesn’t really) and you will not pay any tax.  Let’s use that $18,500 to pay ourselves for all our hard work.  We will use the often promoted 2 hours per day (728 hours per year) you could be led to believe you will make $25/hour.  Not something to be sneezed at in this economic climate.  But…

While your fish will not take that much care, perhaps a few hours per week feeding and checking water quality, seeding, transplanting and harvesting/packing 550 plants per week will take quite a bit of your time.

Your Market – Direct Sales

You will not be producing enough fish to sell, but perhaps you will have a healthy supply for yourself, so we will write them off.

Generally, with small farms you will be a retail operation where you will rely on direct farm gate sales, which are spasmodic at best if you have an ideal location, you will also be selling into weekend farmers markets and the odd restaurant.

We have some experience with this, farming 40 acres of bananas and paw-paw with rotational small crops and selling into wholesale markets and once a week we would set up a stall at a weekend Scout market.  We also sold freshwater crayfish directly into restaurants which were fickle in their weekly orders.  You can write off that 14 hours a week right there, just in preparation, packing and spending the day at the table selling your goods without taking time to deliver a few bunches to restaurants.

Where do we find the time we need to seed, transplant (if not seeding directly) and harvesting our crop each week?

Well we work all week to do that and perhaps you can write off another day for that event each week.  Then apply your 2 hours a day for the other 5 days understanding this is a 7 day a week job.  Now we are up to at least 35 hours per week and our pay has gone from the luxurious $25/hour to $10/hour in a heartbeat.

What of Maintenance and Expansion?

The simple answer is you do not have the capital returns so will not afford any without further debt.  Most of the infrastructure on the farm will have a 10 to 20 year lifespan (tanks etc).  However, the farm machinery (pumps, vehicle and like do not), the poly tunnel roofs are good for about 5 years if you do not have a storm between.  So while you will benefit from a new system for perhaps a few years, the gear will need some attention which will need money you don’t have.

Is this a Commercial Farm or Aquaponics for Profit?

First we have to understand what commercial is:

While the term is also widely used in other areas of finance and everyday life, it generally denotes an activity that pertains to business or one that has a profit motive.
Read more: http://www.investopedia.com/terms/c/commercial.asp#ixzz2M2UTgSh4

While this farm is a business so it might be loosely classified as commercial.  However the farm is not viable, in its current state and investment, because it has no capacity to make profit.  So I would call this a hobby farm which would require possibly normal full or part time employment elsewhere to support it.  Or that $100k might be better off in cash long term investment and return your 6% while you sleep well at night.

Aquaponics for profit is sold by shysters that know very little about commercial aquaponics and only look to line their own pockets and leave you stranded and in nearly all cases broke.

We continue this conversation in the next post here.

Regards
Paul

Not everyone that starts out with good intentions gets to where they want with farming.  Especially those looking to get into aquaponics for profit that are told for next to no effort (2 hours a day) they can make $1500 (gross) per week and only invest as little as $50,000.  While it might be possible, it is not quite that clear cut.

These start-ups are usually troubled by poor designs sold by slick sales pitches on videos that promise extravagant returns for very little investment.  They will tell you it is easy and anyone can do this and make a small fortune.  While you might make some money, the amount of effort required is severely understated.

There is always risk to farming ventures and integrated aquaculture “aquaponics” and aquaculture are no different.  For those getting into aquaponics specifically for profit, these over the top claims of returns do very little to assist those wanting to be successful and make some coin for their families.  They do however, encourage start up failures and reduce industry investment.

Take out of the picture for a minute, the flawed designs, with redundant  equipment, inefficient layouts outs and focus on the money.  Sure I can skew the numbers to make my point, but I prefer to enter over estimating the cost and underestimating the returns, so any improvements increase the bottom line.

Aquaponics for Profit: An Example

Let’s look a hypothetical example which is not much different to the aquaponics plans we published (noting it is not a financially viable system here in AU):

4000 litres of recirculating aquaculture tank system running 2200 plant holes at full production which does not take into account start up commissioning time.

Firstly, 4000 litres of fish tanks will not produce anything worthwhile in terms of business or making you money.  Even if you stocked the tanks with one batch it will only produce 100 to 120kg of fish per year, if you are lucky.  This makes for a very expensive nutrient distribution system with the 100 to 120kg per year making you perhaps $2000 turnover.

Now, the 2200 holes in a hydroponic system, which is roughly 90m2 of growing area if you have your hole spacing right, in this case sitting inside 450m2 poly tunnel.  This will net you about 25,000 plants per year if you have no growing issues or unsaleable product, which is highly unlikely.

I have seen advertisers of such systems suggesting you can get up to $1.50AU per plant and even as high as $3.00AU.  Let’s take the lower value just to be on the safe side and we want to believe them.  You could be lead to believe you might turn over $37,500 per year revenue on the plants alone.

With a $40,000 turnover per year, it might look like a good income for a single person without too much debt.  But is this really aquaponics for profit?

What is the cost?

Some of the major capital you might be looking for (not our prices..):

  • Poly tunnel – $30,000
  • Fish shed – $15,000
  • Aquaculture system – $20,000
  • Hydroponic system – $10,000
  • We have not included development applications and fees for construction.
  • Total – $105,000

Operational overheads

  • Cost of fish production at $8/kg – $960pa
  • Cost of plant production at $0.15/plant – $3750pa
  • The big killer if you borrow over 10 years at farm interest rates – $16,800pa
  • We have not included vehicle costs (fuel, insurance, rego etc)
  • We will not include licensing, permits and audits or stock and equipment insurance (often 4% of capital or turnover) either

That is about $21,500 cost per year leaving you with $18,500 before taxes.  We are going to assume your business makes no profit (well it doesn’t really) and you will not pay any tax.  Let’s use that $18,500 to pay ourselves for all our hard work.  We will use the often promoted 2 hours per day (728 hours per year) you could be led to believe you will make $25/hour.  Not something to be sneezed at in this economic climate.  But…

While your fish will not take that much care, perhaps a few hours per week feeding and checking water quality, seeding, transplanting and harvesting/packing 550 plants per week will take quite a bit of your time.

Your Market – Direct Sales

You will not be producing enough fish to sell, but perhaps you will have a healthy supply for yourself, so we will write them off.

Generally, with small farms you will be a retail operation where you will rely on direct farm gate sales, which are spasmodic at best if you have an ideal location, you will also be selling into weekend farmers markets and the odd restaurant.

We have some experience with this, farming 40 acres of bananas and paw-paw with rotational small crops and selling into wholesale markets and once a week we would set up a stall at a weekend Scout market.  We also sold freshwater crayfish directly into restaurants which were fickle in their weekly orders.  You can write off that 14 hours a week right there, just in preparation, packing and spending the day at the table selling your goods without taking time to deliver a few bunches to restaurants.

Where do we find the time we need to seed, transplant (if not seeding directly) and harvesting our crop each week?

Well we work all week to do that and perhaps you can write off another day for that event each week.  Then apply your 2 hours a day for the other 5 days understanding this is a 7 day a week job.  Now we are up to at least 35 hours per week and our pay has gone from the luxurious $25/hour to $10/hour in a heartbeat.

What of Maintenance and Expansion?

The simple answer is you do not have the capital returns so will not afford any without further debt.  Most of the infrastructure on the farm will have a 10 to 20 year lifespan (tanks etc).  However, the farm machinery (pumps, vehicle and like do not), the poly tunnel roofs are good for about 5 years if you do not have a storm between.  So while you will benefit from a new system for perhaps a few years, the gear will need some attention which will need money you don’t have.

Is this a Commercial Farm or Aquaponics for Profit?

First we have to understand what commercial is:

While the term is also widely used in other areas of finance and everyday life, it generally denotes an activity that pertains to business or one that has a profit motive.
Read more: http://www.investopedia.com/terms/c/commercial.asp#ixzz2M2UTgSh4

While this farm is a business so it might be loosely classified as commercial.  However the farm is not viable, in its current state and investment, because it has no capacity to make profit.  So I would call this a hobby farm which would require possibly normal full or part time employment elsewhere to support it.  Or that $100k might be better off in cash long term investment and return your 6% while you sleep well at night.

Aquaponics for profit is sold by shysters that know very little about commercial aquaponics and only look to line their own pockets and leave you stranded and in nearly all cases broke.

We continue this conversation in the next post here.

Regards
Paul

About the author

Paul Van der Werf

Paul is the Operations Manager for a 4400m2 integrated aquaculture pilot project in the United Arab Emirates desert he designed and built. This is a commercial aquaponics pilot to evaluate integrated farming in arid climates.

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31 Comments on “Aquaponics for Profit – The Real Cost

  1. John

    Now that’s aquaponics gold Paul

    Reply
  2. Paul,

    VERY GOOD breakdown of the reality of commercial aquaponics! I speak with too many people who listen to the “shysters” and believe that there is a rainbow and a pot of gold at the end of it. My fall back comment is: “Why don’t you see small-scale hydroponics businesses that much and why do farmers never have any money?” Agriculture is the hardest industry in the world and most market gardeners will admit that they run their businesses at a loss most of the time!

    I am currently operating a small commercial system and doing an analysis of it in Melbourne. I cannot include any figures yet, but you are correct, its a hard slog for little income! I am partnering with someone on this and my current guess is that an hours work is worth about $10 – $15. You get more per hour being a check out person at Coles!! I have over 8 years experience running commercial systems so I should be efficient at it, but still it is tough!

    I am not saying there is not an opportunity to make an income, but scale is paramount and marketting and sales knowledge is where the income comes from. Its not about “aquaponics”, its about running a business! And anyone in business will tell you that upfront, voracious economic modelling is vital to scale and profitability.

    There is way too much crap being told to people and way too many people praying on others because of the current “romance” associated with aquaponics.

    Thanks for the post.

    Wilson

    Reply
    1. Hi Wilson,

      Thanks for your input.

      These type of “shysters” are not new. Aquaculture and Hydroponics suffered from it when they first became popular. We saw a string of “interesting” claims and designs hitting the market with pleny of fresh ideas and some very slick sales pitches. CBox is one example.

      The market will eventually sort them out as a chain of failures follow in their wake. I think collaboration with leaders in their respective fields will help to drive the “fast buck” guys out of the market and professionals like you Wilson, who steer the course and maintain an ethical approach will be left standing when the dust (mud) clears.

      Taking the high road does not make us a great deal of money, and my Ferrari repayments are overdue, but we sleep well at night.

      Regards
      Paul

      Reply
  3. James

    ‘very succinct Paul… gee, now that wouldn’t be a common furphy would it?? :)

    Reply
    1. Thanks James.

      As a successful business owner yourself, you would know that all businesses suffer this type of oversight and I would go so far to say that lack of planning plays a critical role in those failures. People are in too much of a hurry to get to the mysterious pot of gold they think a business will present to them in the short term, yet very few have the stamina to see it through.

      Regards
      Paul

      Reply
  4. John

    Good to see your putting your viewpoint also Wilson…as to the “reality”… rather than the “romance”… of “commercial” aquaponics….

    As a previous “small-scale hydroponics businesses”… I can relate to what’s being said… and to concepts of scale…

    Reply
    1. Hi John,

      I would be, as I think our readers will be very interested in your experience with small scale hydroponics. Perhaps a guest post about the effort you went to to make ends meet?

      Regards
      Paul

      Reply
  5. Chris

    great post Paul … could it be that commercial AP systems are more suited to warmer climates where the traditional four seasons are not an issue? … fish production is greatly accelerated in certain species due to constant warm water temps , sunshine is abundant for the veg … i am talking countries that are not heavily regulated in food production ..perhaps producing in these countries for export maybe an option ….but overall i agree the amount of BS flying around can only harm AP in the shorterm

    Reply
    1. Thanks Chris.

      These are great questions and ones that may need a longer response…

      To be short and sweet; scale of the operation and investment will change in different markets which climate will sometimes dictate. Without climate controlled growing, your warmer climate will be limited on the varieties you can successfully grow and this is the same for cold climates. Warm is not always associated with great growth, however sunlight intensity is. Equitorial regions certainly have plenty of that.

      Your region Chris, with a stable warm climate with plenty of good sunlight will not make it easier but dense population which provide a very large market increases the chance of success. Often in those Asian regions it is difficult to establish your point of difference or capacity to “stand out in the crowd”. I agree, countries where regulations are a little lighter (than AU) make entering the market much easier.

      Perhaps we can tackle this in a more detailed post.

      Regards
      Paul

      Reply
      1. Chris

        thanks Paul … i agree with your major point …you must produce what is required in your region/city/ suburb etc ..grow what is required and expand the order book as required, build your business growth around this ….as an example here in Thailand ,( where produce is abundant) three factors are forcing hotels / restr/ cafes to re think where they purchase goods ..

        1/ quality … u take a walk in any major supermarket and look for locally grown organic produce …minimal if u can find it ..what u do find is a mass of produce from China / Taiwan and the US .. the locally grown farm produce here is mostly consumed in local villages / towns and not sent to market ( also not organic)

        2/ pricing .. major fluctuations sometimes weekly on the cost of produce ..hence its difficult for these groups to set prices on menus etc …. remembering they are in a highly competitive sector as well …

        3/ supply…. sometimes produce is just not supplied ..unavailable at any price …

        Thanks again for the great site

        Cheers

        Reply
        1. Hi Chris,

          You make three very good points, Quality, Price and Availability. They all go hand in hand. If you can gain several restaurants that will buy from you every week, you stand a good chance provided they are loyal. As I said, we sold crayfish into restaurants in the UK and one week they would buy the next they did not. And the crayfish were not available locally at all. So the quality and price did not appear to affect the sales.

          Be it, we were selling a product that was not on their menu, you could not buy in the UK and the price was quite high; 32 pounds per kilo which was the equal to $70AUD per kilo when local prices in AU were $19AUD per kilo.

          Being the availability was never guaranteed, chefs tended to be cautious about putting the crayfish on the menu, so with that they tended to put them on specials.

          The general herbs and greens will be a different story in your region Chris so you may stand a good chance of success with a small, efficiently run operation. You got the free plans didn’t you?

          Regards
          Paul

          Reply
  6. Pingback: Hobby Farming with Aquaponics | Earthan Group Pty Ltd

  7. Stephen Davidson

    Paul, Thanks for the great posts! I’ve been searching for a long time on realistic information and viable business models for aquaponics systems. I wish I lived close enough to attend some of your training.
    smd

    Reply
    1. Thanks Stephen.

      Unfortunately, I do not run any training courses. The NSW aquaculture association may be running one in the near future, which will focus on commercial farming. If we get enough interest, I expect there will be quite a few speaker from leaders in their respective fields relating to integrated systems.

      Keep an eye out for that.
      Paul

      Reply
  8. Pingback: Aquaponics for Profit – Back to Reality | Earthan Group Pty Ltd

  9. Paul Bray

    I grew hydroponically in the mid ’80′s in the US. I thank you for the realistic look that marketers ignore. There is money IN growing vegetables, the trick has been and still is — how the get the money OUT. Here I am thinking that a home scale production sounds fun to get back in. As a “NFT purist” I did not believe that aquaponics was an option. The one link everybody has eliminated is a layer of rabbits under the shade of greens and above the fish tank for pellets from heaven food source. The rabbits also gave winter heat or so the plan went.

    Again thanks for the hard truth. My dad came for a visit one time and was surprised how tied down we were to the operation. His observation was that dairy cows only have twice a day attention. Our 5500 head/ week lettuce operation seemed to demand every thirty minute attention.

    Reply
    1. Hi Paul,

      Thanks for your comments and thoughts.

      Farming is a tough job when selling direct to markets. Even selling wholesale was difficult with price fluctuations. Selling wholesale, while lower prices, we had more time to work on the farming instead of selling which I expect a retail farm operation would do most of the time.

      Regards
      Paul

      Reply
  10. Mike Warner

    Thank you Paul!!
    Thank you responders!!!!… particularly Wilson.
    I have been particularly wary of some of the claims I have seen on various websites and YouTubes about the commercial viability of small (commercial???) scale Aquaponic systems.

    I spent a lot of time and effort doing a feasibility study on this for venture based in the foothills of Perth.
    My business plan spread sheet calculations went through a number of iterations… based on what I’d seen online and from other research.

    There was no way I could design build,and operate a system that could actually make a return on net investment…. if I factored in a wage for someone with relevant skills to operate the system.

    A hobby farm for a retired person able to supplement superannuation or a pension possible.

    However… as well pointed out in the post by Paul… there is an ever present danger of catastrophic loss. in any one year.

    If this is not factored into income/expenditure figures… failure is as near as a season away.

    Thank you all… for convincing me that I am far better served with a home based system as family hobby… with some small scale sales to organically oriented friends and family in the neighborhood. A less stressful retirement for me!!!

    Mike
    P.S.

    Past self employed and contract management consultant, small business specialist and member of the Institute of Management Consultants. Retired November 2012.

    Reply
    1. Thanks for the feedback Mike.

      I would be interested to see your spread sheet for the feasibility. If you are of mind, please drop me an email.

      Regards
      Paul

      Reply
    2. Mattie

      Hello Mike .Ive been looking at the commercial end of aquaponics a lot lately.If its not asking too much, would it be possible that i could take a look at your work on the excel spreadsheet?
      Regards Mattie

      Reply
  11. Pingback: Aquaponics for Profit – The Risk | Earthan Group Pty Ltd

  12. Ralph Zerbonia

    There are many comments regarding the difficulty of ‘small scale’ aquaponics in making a profit. What size is a minimum to not be considered ‘small scale’ and what size do you think is optimum to produce a profit as things now stand?
    Thank you for the valuable information in your article.
    Ralph

    Reply
    1. Hi Ralph,

      This is a great question. Unfortunately the answer is not quite as simple. In future articles we will cover minimum sizes and scale of economy that may help

      Regards
      Paul

      Reply
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  14. george adamos

    Hello,

    I am 56 years old, unemployed for the past 3 years located in Larissa,Greece.
    acquaponics was passed on to me ffrom friends and I am doing a lot of research
    As I dont have a lot of money to invest in,but I have the land I am thinking for a small
    scale unit 50 to 100m2. The produce will be sold mostly to the flea market .
    After all these years of being unemployed, you get easily depressed and one can make eaily mistakes.
    So,any thoughts that you might have for me to start something like that i will be much obliged

    Thank you
    George Adamos

    Reply
  15. Damian

    Buy your energy in bulk, eg. Ten years / solar, it helps alot because with grid tied WHEN you lose a crop you still have to pay bills or get cut off.

    Sell seasoning/herbs if there is a processor near by that will take your product it will help because they don’t care about the looks as much as the guy at the farmers market.

    What ever you do lower labor cost.

    Reply
  16. Hi Paul.
    Thank you for your time to explain all that. I enjoy reading your posts, specially now when its all new and fancy ;)

    I wanted to ask for your opninion regarding vertical farming (zipgrow towers or similar). Do you think the result with going vertical and growing value added products (like herbs, rucola, dandelion,…) will change anything? After all – scale of the economy, should come into play with increased crops per m2?

    I agree with Wilson that marketing and proper positioning of the products (making premium brands out of aquaponic vegetables) will help a lot!

    Reply
    1. Hi Vito,

      I really cant say as I have not had any experience with vertical farming. It may be a question for those working in that field.

      At a glance, if you want to limit the type and weight of the crops you grow, then zip towers will work well. I have see A-frame systems that propose 8 times the production output but the management of the system I expect will add to the labor costs due to access to the crop.

      Trying to get premium prices is about the only way to make money with small systems and it is a very fragile market that requires a great deal of care and maintenance. I think the customers will only be loyal until something better comes along so it is good to spread your product across many customers.

      At a larger output, the business is only concerned with meeting quality expectations of the major outlets and maintaining consistent supply of consistent grade product. This can be dangerous as your income is generally tied up with only a few customers. However, at that level you have a supply contract for X period to ensure they don’t just drop you.

      There are many options, but I like to stick to what is tried and tested. Experimental farming or markets is the cutting edge, and often the cutting edge is the bleeding edge.

      Regards
      Paul

      Reply
  17. Paul thank you for the information. As you know (Paul) I am attempting just that with my project. For you the readers; We are almost 2 years into the project. I am a little handicapped, so a full human it could be much further along. However to say the least we are (at this date) to even sell anything.

    We have built the system on a shoe string budget and have only just recently planted some seeds. Our current outlet appears to be selling seedlings at the local weekend market.

    This is not meant to turn people off, I am just highlighting the facts that Paul has presented here. It is not a quick fix or a quick buck. It is a long and painful process. I am sure it would have been much longer with out Paul’s input, help, support and advice.

    Thank you
    John’s Aquaponics Farm

    Reply
    1. Thanks John,

      I know how hard your journey has been so far.

      You would agree getting workable advice tailored to your situation and means is very difficult. Generally I have found most “consultants” want to sell you “their” system and have no scope to adapt to various needs of the client…

      Keep up the good work mate you will get there.

      Reply
  18. Great article and reader-comments as well.

    I too am retired early at age 54 and am doing a hobby aquaponics setup. My expectations are low as regards future income, but my enthusiasm is high because I love aquaculture and would be happy just to cut my own grocery bill down a bit.

    In the past I have built ponds for goldfish, built my own filtration systems, and grown lots of aquatic plants. Also, I have done some aquatic gardening (submerged aquatic plants in aquariums) growing in soil rather than gravel beds, and using CO2 injection to boost plant growth. Aquaponics isn’t too far from my propr interests, so I am optimistic. Thank you for the excellent guidance.

    Regards,

    Patrick Wright

    Reply

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