Hydroponics Business Plan: Market Analysis and Financial Projections

This document presents a comprehensive business plan for a hydroponics venture, named "Vertical Greens," focusing on establishing an aero farm. The plan includes an executive summary, business goals, market analysis, marketing strategies, operational details, and a financial plan. The business aims to initially serve the local market with both exotic and popular vegetables, utilizing vertical farming techniques to minimize resource use. The market analysis covers industry trends, seasonality, and competitor analysis. The marketing section outlines strategies for reaching target customers, including tie-ups with local grocery stores and restaurants. The financial plan details funding requirements, and the critical risks section identifies potential challenges. The plan also includes background information, a mission statement, and company history, emphasizing the venture's commitment to providing fresh, chemical-free produce and contributing to environmental sustainability. The business seeks $100,000 in funding to complement the owners' existing funds and includes detailed financial projections. The document also provides details about the product and services offered and the primary target market.

Hydroponics Business Plan

Contents
1. Executive summary 3
Business Goals and Ideas 3
Marketing 3
Operations 3
Finance 3
2. Background 4
Mission Statement 4
Company History 4
Business Goals 5
3. Market Analysis 6
Market Research 6
Market Analysis 6
4. Products and services and Primary Target Market 7
5. Marketing 8
Mock up of our advertising 9
6. Financial Plan 11
7. Critical Risks 13
8. Bibliography 14
2

Executive Summary
Business Goals and ideas
The idea of this business is to establish an aero farm that would be started with
elementary vertical farming in the first phase, growing gradually over less than 5 year
towards its ultimate goal of becoming an aero farm feeding a population of millions
across the globe, initially starting with feeding the more reachable local population.
In its initial phase this business would use lesser manpower and technology gradually
growing towards a fully equipped aero farm and would be incorporated as a
proprietorship named “Vertical Greens”.
Marketing
As mentioned above in the initial stage of inception we are set to cater the needs of the
local market, making our supplies available online to spread our feet farther. However,
most of the produce would be sold to the local grocery stores, Supermarkets and
vegetable vendors. We plan to tie up with online grocery suppliers like Woolworths
Supermarket, Coles Supermarket, Harris farm, sydneyfresh.com etc.
We plan to promote the business by conducting events and helping people know the
benefits of indoor grown crops over the conventionally grown.
Operations
The business will operate with two employees initially, during the first sapling stage,
which would include one expert in the area of plant nutrition. When the crops start to
grow further we would hire two more employees to look after the health of the crop and
also other works like, regular nutrition, replacing the dead plants with new ones etc. We
might need to hire one or two people seasonally as per the demand of the growth.
Finance
We are seeking a funding of $100,000.00 and have available funds of $100,000.00 saved
by the owners; the additional funding is expected to be received by National Australian
Bank or Australia and New Zealand Banking Group. If we are successful in getting
funded under the agriculture loans we would have to pay the interest rates of 2.5%
annually that would prove to be a major cost relief to our venture.
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Background
Mission Statement
Vertical Greens would provide fresh quality and harmful chemicals free greens to the
people helping them to lead a healthy life ahead, the crops grown with us will be
handpicked and packed in best possible containers to avoid any contamination; we also
assure to prove insecticide or pesticide free greens, that will look juicy because they will
be fed well with all the required nutrition and will be taken care of like that of a child.
The venture expects to grow tremendously on a global scale having its own aero farms
across Australia and New Zealand and contributing to the crop exports of these two
nations with best quality assured crops.
It will be our objective to reduce the use waste of any natural resources like, land, water
and soil that are tremendously exploited in conventional farming methods (the statistics
are given further).
In this way Vertical Greens would strive to become a brand and a food option that every
household would trust for their good health. Apart from being contributors to the health
of the public at large by delivering freshness in every bite, we as well would solemnly
fulfill our duties towards the mother Earth by ensuring minimal to nil use of the scarce
natural resources.
Generating more and more employment as our venture expands we will also be willingly
contributing towards the public welfare, with welcoming all the new and innovative ideas
that could maximize our yield.
The owners of the company would be served by the high prospective profitability and the
market reputation that the venture is planning to achieve, paying the owners back for
their hard work, effort and faith in the venture (Baker, 2016).
Company History
This is a new venture that sprouts from the mind of the owner, looking at the quality of
vegetables used worldwide and the harmful chemical elements involved in making them
look fresh has motivated the individuals to step into a business that would reach out to
people at an individual level (Reynolds, et al. 2015). The owner was moved by the view
of the amount of forests lands being eroded each year to feed the multiplying population
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of the world each year and wish to contribute by reducing the needs of such enormous
areas by being more productive in much lesser areas.
Business Goals
In the first year of operations (estimated to be 4 seasons of 90 days each) we are aiming
to produce two categories of veggies, the exotic ones and the popular ones. Wasabi roots
and Pink lettuce being exotic vegetable options and expensive in the Australian market
helping us capitalize more funds to fund the growth of our venture. On the other hand our
produces would have broccoli, cauliflower, celery and cabbage in the popular segment.
Helping us maintain a balance between funds and the output produced (Carey, et al.
2016).
The sales of each season would help us plan the coming seasons accordingly also helping
us understand the quantities to be grown and the market demands of individual crop. We
wish to rent a commercial warehouse space of 200 m2 for our venture in the Rockdale
Area Arncliffe, with a weekly rent of $800 (negotiated rent); we wish to split this space
into 8 floors of produce making our available growing area 1600 m2 out of which 1000 m2
is estimated to be the utilized area for growing crops, at an expected average produce of
20Kgs/m2, we aim to achieve a produce of 20,000 Kgs of produce per crop season.
Marketing
Market research
Sources used to prepare the market forecasts:
 Mordorintelligence.com that have the forecasts in one place,
 Marketresearchfuture.com that have the crop wise research data
 Researchgate.net
 Personal visits to the supermarkets
 Enquiry calls with Harris Farm
 A brief individual knowledge
 Conversation with a known who has some technical knowledge in this area
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A brief view of our business setup post maturity of the plants.
Market Analysis
After going thru all the information gathered by us the following was concluded.
(a) Industry Analysis
The Global Hydroponics Market is expected to register a CAGR of 6.5% during
the period, 2018 to 2023. Europe being the traditional market is the largest that
has implemented advanced techniques in hydroponics. Asia-Pacific forms the
second largest market, expected to grow at a steady rate. However Australia being
the developing market sees more scope of growth in this area (Aka, 2017).
(b) Seasonality
The crops would be grown under controlled environments thus making them
immune to the climate changes, however some crops are preferred seasonally than
the others, like exotic veggies would be more preferred during the festival seasons
than others as people spend more on having exclusive family dinners, and around
the food and Vine festivals (Cumming, Grilli and Murtinu, 2017). However,
vegetables being daily demanded items the seasons are not to affect the business
on a very large scale.
(c) Competitors:
 Conventional farmers, though these cannot compete the modern
hydroponics produce, there are market sentiments and people who would
stick to buying the conventionally bought produce (Hanson and Bell,
2007).
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 Existing hydroponic players would give a tough competition as they are
using the same methods at even larger scale and have far more
technologically equipped setups like ELMAC, Ferguson Homestead etc.
Products/Services and Primary Target Market
(a) Exotic vegetables
These are vegetables that are heavily priced in the Australian market, the picked
up crops for our venture along with current open market prices are:
 Wasabi roots costing $ 102.2 per pound i.e. almost $ 225.35 per kg and
our prices will be kept as low as $ 150 per Kg
 Pink lettuce costing around $ 14 per pound i.e. almost $ 30.87 per Kg our
price would be as low as $20 per Kg
Target Customers:
The Wasabi roots are freshly grated into the sushi and are one of the reasons why
sushi is such an overpriced food. We are looking forwards to tie up with the local
sushi restaurants like Sushi Rio, Sushi e and Sushi Hotaru, catering their wasabi
needs, this is expected to consume the entire produce of Wasabi that we grow
initially (Dapiran and Hogarth-Scott, 2003).
Pink lettuce though not very different from the normal lettuce has been gaining
popularity over the internet over time due to its rare natural color, we are looking
forward to supplying these to restaurants serving fresh salads and also to sizzler
selling restaurants, as the leaves of Pink lettuce would be a more appealing sizzler
base, this is again expected to exhaust the entire produce of the pink vegetable.
(b) Popular and more consumed vegetable
These are vegetables that are bought on a daily basis by the households,
restaurants and other food vendors by whatever name called, these vegetables
though not very expensive have a very high market demand making them
quantitatively beneficial produce, the current market rates of these vegetables as
listed on Harrys farm are.
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 Broccoli priced at $7.99 per Kg is including in our staple diets, making it a
part of almost everything we eat straight from pizzas to the salads; we
would price the vegetable at $6 per Kg to penetrate the market
 Cauliflower sold by per head rate cauliflowers are priced at $ 6.99 per
each will be priced at $5 per head
 Celery is priced in a similar fashion to that of a cauliflower priced at $5.69
per each and would be sold for $4.5 per each by us
 Cabbage is priced equal to Celery at $ 5.69 per each, and will be equally
priced at $4.5 by us.
Target Customers:
These vegetables can be sold at any platform but initially we would like to sell
them in the local market thru vegetable vendors and supermarkets to understand
the market so as to excel in our future years (Hollinger, et al. 2001). Our potential
tie ups with the websites selling the same are expected to exhaust any excess left
with us.
Marketing
Initially marketing would not be an issue with the vegetables grown as these have a ready
market, however we have to tie up with the above-mentioned restaurants to sell our
exotic produce (Zhu and Chen, 2015). Currently in talks with the online sellers and the
Supermarkets we are expected to be able to market the product pretty well. Moreover
there is little to very less need to spend on advertisements, our major expenses to market
the product would include the storage costs and the cost of deliveries (Knoll, 2016).
Pricing
We plan to advertise on radio and over social media for people to understand the better
quality offered and the benefits of buying from us, this is expected to cost about;
Radio adds would cost about $500 per week as chosen from the range of prices listed on
fitsmallbusiness.com according to our add choices that we wish to run for the entire year
so that we are able to lock the idea of fresh vegetables associated with our brand in the
heads of the public at large (Ryan, 2016).
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Advertising on social media would again be a great idea as people from every age group
is available at social media today, so even if we are unable to put the idea of buying our
produce in the ears of the public thru radio we are sure to reach them by the screen they
see every day, out of all the other social media we would choose to advertise on
instagram, as the click thru rates on instagram are very impressive, users roughly click
thru instagram advertisements 2.5 more times than any other social media site (Source:
Fortune) priced at $9.38 per thousand views we are expecting our advertisement to be
viewed by about 4 million people costing us about $37,520 initially (Source:
ThriveHive.com)
Mockup of our Advertisements:
The tag line of our brand would be:
“Skies are vertically high and so are our veggies, eat fresh and achieve more”
-Vertical Greens
This tag line is supposed to play in all our radio advertisements that would read
something like:
“Why eat off mother earth, even vegans can’t save the diversity from extinction if
conventional farming keeps growing, contribute your part in saving the planet by buying
fresher and healthier veggies from Vertical Greens because every acre saved counts.”
Along with the above captioned in our instagram advertisements we would falsh an
image of the difference between the produce and how beneficial hydroponics is to the
planet even after delivering better quality (Schellhorn, Nyoike and Liburd, 2009).
Images to be flashed:-
Comparison between the vegetable quality:
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Soil Produce Hydroponics Produce
Benefits of Hydroponics and Aeroponics and the utilization of space:
These advertisements would do both; capture the attention of the public towards the
health benefits and also capture market sentiments towards the planet (Suthar, 2009).
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Financial Plan:
Expected Annual Revenues
Produce Kgs/season Annual revenue Earned
Exotic
Pink Lettuce 2000 144,000.00
Wasabi Roots 2000 1,080,000.00
Regular
Broccoli 4000 86,400.00
Cauliflower 4000 93,600.00
Celery 4000 92,592.00
Cabbage 4000 92,592.00
Total 20,000.00 1,589,184.00
Expected Annual Variable Expenses
Produce Estimated Expenses
Exotic
Pink Lettuce 28,800.00
Wasabi Roots 216,000.00
Regular
Broccoli 25,920.00
Cauliflower 28,080.00
Celery 27,777.60
Cabbage 27,777.60
Total 354,355.20
Initial Outlay of Funds
Set up costs 50,000.00
Rent 9,600.00
Radio Add 6,000.00
Instagram Add 37,520.00
Variable Costs 59,059.20
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Employee Cost 21,000.00
Total 183,179.20
Annual Fixed Costs
Maintenance Costs 10,000.00
Rent 41,600.00
Radio Add 26,000.00
Instagram Add 37,520.00
Employee Cost 21,000.00
Other Ancillary Costs 20,000.00
Borrowing Costs 2,500.00
Total 158,620.00
Notes and Assumptions:
 The Revenues generated each season will be used to fund the other seasons.
 In the first season only 60% of the capacity is utilized due to insufficiency of
funds
 The crops are grown evenly throughout the year assuming there were no market
changes and all the noticed changes will be incorporated from the following
years.
 We will rent additional spaces from the next year onwards.
 All the researched data materializes and there are no changes to it.
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Critical Risks:
This being the budding stage of the project there are many critical risks involved to it,
some of those being listed below:
 Mismatch Between Equipment used can cause a problem later;
 Any fault in the selection of crops can lead to a big disaster wasting the funds
invested, time and the efforts put in (Thomson, et al. 2007),
 Nutrition plays a very important role any compromise with the correct nutrition
would lead to a tremendous loss of revenue and capital,
 There might be legal and other associated costs that are not considered now,
 Incorrect temperatures and lights used can also cause damage to the promised
quality of produce (Zhao, 2005),
 Choice of market is not very easy as it seems, choosing the wrong market can
again harm the business
 Natural losses and damages at the sprouting stage due to the quality of seeds,
 Losses while transferring the saplings to the main pipelines,
 Inadequate storage, since we have considered the crops are sold as soon as
harvested, there is quite a possibility that there might arise a need to store the
crops which would again be a critical decision, these being perishable in nature
and very prone to attacks by rodents and insects damaging the produce (Willmott,
2016),
 Competitors offering lower prices than our costs, can lead to loss of market as we
have big players unwilling to let us enter the market of their own.
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(Source: The above risks have been studied from an article published in
agfundernew.com)
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