Business planning

If you are seriously considering whether the alpaca business is for you, don't forget to check out our Alpaca Farm Business Planning guide, available at: 

Alpaca Business Plan.

Business or investment?

Many people call alpacas the world's finest livestock investment, but in reality, it is a business. An investment suggests a passive activity, rather than one that entails feeding, cleaning, caring for, and generally looking after the object of the investment.

Nevertheless, alpacas offer can offer a very high return on your initial investment and usually require a relatively low level of maintenance. Even a small herd on a limited acreage can show a handsome profit on fleece and livestock sales.

There are also various schemes available for participation on different levels, everything from owning your own animals, and membership of a marketing cooperative, through to a partnership in an alpaca investment syndicate.

Return on investment

The key to realizing significant gains through breeding alpacas lies in the compounding effect of keeping the crias that are born, and subsequently breeding them. In this way a modest start of, say, three bred females, can grow to about 30 animals in 5 years. Allowing for the fact that they are likely to be half females and half males, with an average value of say, $10,000, an initial investment of about $60,000 could grow to $300,000, or more.

If you are fortunate enough to breed one or two good herdsires, you could ask at least $30,000 each for them. That would make the case even more attractive.

Tax

In addition to the compounding effect, many people also benefit from the generous tax allowances. If you are operating as a genuine farm, your expenses are allowable against income, and your profits in the herd are only payable when you actually sell the animals. In some cases, you can have the profit taxed as capital gains, instead of income.

If you add in the depreciation available, you can easily end up paying only a net 60% of the purchase price, over 5 years.

Of course, the circumstances vary with each individual, so it is important that you talk to a financial adviser or CPA that specializes in livestock. You can also get a very helpful booklet from the IRS - #225 Farmer's Tax Guide.

Finance

Although a lot of people like to pay cash for their alpacas (sometimes borrowing against their home equity to do it), many others prefer to take advantage of the on-farm finance options that we offer. Of course, you are likely to get a better price if you are paying cash!

We are always prepared to consider new financing alternatives, but the arrangements made usually consist of one of two options.

First, the cost can be spread over 12 months, interest-free, with a thirty-three percent down payment, followed by eleven equal installments.

Alternatively, a down payment of twenty-five percent can be made, followed by equal monthly payments over 2, 3, or 4 years. This arrangement would usually incur an interest charge of 1% over base rate.

Neither scheme requires any credit or background check, and nor are they reported against your credit score.

In either scenario, the buyer is responsible for insuring the alpacas for the full replacement value, naming Alpaca Advantage as co-beneficiary. Insurance usually costs 3% a year.

Even under a finance agreement, you are welcome to take them to your farm.

Business plan

As with any other business, it is vital that you have a business plan prepared before you start, otherwise you have no planned direction for your alpaca herd, and no way of measuring progress in achieving your goals.

The starting point for any plan is to determine what your objectives are. For example, with alpacas, you may be wanting to raise a herd for livestock sales, or for fiber production. You may be doing it for the tax advantages, or for the investment potential. You might be buying alpacas because you are interested in spinning, or just to have wonderful animals on your property. Or any combination of the above! There are almost as many reasons are there are investors.

We are always delighted to work with you to prepare a business and herd plan. With one partner who has been a professional business consultant for over 20 years experience, and another who has bred llamas and alpacas for 12 years, we are well qualified to help you with this.

If you are intending to raise finance externally, a good business plan is essential in demonstrating that the venture is financially sound and viable, and that you know exactly what you want to achieve.

You may like to check out our Alpaca Farm Business Planning guide, available for sale here: Alpaca Business Plan. 

Marketing

Ultimately, most alpaca owners will want to sell some of their animals. This is an area where many people are worried that they will not be able to get prospective buyers to their farm, or to realize a reasonable price for their alpacas. 

We work with our buyers to make sure that they are able to promote their farm effectively, and to optimize the prices they get for their stock. We can work out individual farm marketing strategies and sales plans, to make sure that you have a detailed road map to show you, step-by-step, exactly what to do, when, and where. Without it, you risk having to sell your alpacas at less than market value or, even worse, not being able to get in touch with sufficient prospective buyers. 

If you prefer, we can always sell your animals for you, for a small commission.