✍️ Guest Post: How to put a $-value to your broodstock
This is a repost of Nicole Kirchhoff’s column @nkirchhoff published by Hatchery International. If you would like your blog, newsletter, or writing to be featured on the AIE, contact us.
Whether during business planning, valuing your business for sale, or calculating insurance value, at some point every hatchery will be asked to put a dollar value on their broodstock.
This is often where the debate begins, not only because each of these valuations is entirely different, but also because there is no agreed-upon market price for broodstock in our industry.
This past month, I called on three other industry experts to discuss this critical topic:
- Nick King, general manager for SalmoGen;
- Carlos Lopez, director of commercial sales for Spring Genetics;
- Brad Gentner, a natural resource economist and president of the Gentner Group.
It is clear that valuing our broodstock is not easy. As Lopez exclaimed, “It is something we struggle with every year.”
First, let’s talk about a business valuation of broodstock for financial planning and setting a required market price for products. For business reasons, you may calculate the production costs of raising a broodstock to their current age, condition, and fertility. As King explains, you need to “differentiate those first couple of years when they are raised basically as a production fish, from the final year or time leading up to their maturation.”
For example, a five-pound mature tilapia broodstock may have cost a business US$9 in production costs. Or you may instead calculate the production-based value of these broodstock in terms of their offspring production potential, i.e. fecundity, survival rates, and market price of the fish.
“We know the fair market value of [salmon] eggs,” King elaborates “and we can put a value to that. A 10-kg salmon can produce 1200 eggs per kilogram, so presumably 12,000 eggs at whatever the market price is. So that is the value potential of that broodstock.”
This is much more complicated with species such as marine fish that don’t die after they produce eggs, who don’t have an established market price for eggs or brood, and who may have a second market production price for fingerlings.
Instead, an operator must use the best available data, including your business records, to calculate and justify these valuations. Calculating these values helps businesses decide how much broodstock they can afford to maintain and their earning potential for a business over time.
These values, however, may be entirely different, yet somewhat related, to the sales price of this broodstock. Broodstock can be sold either as an ongoing product offering or as an asset of a company up for sale. As a sales item themselves, broodstock may have an established market value.
For example, Spring Genetics sells their tilapia breeders on the world market at a current market price of US$2.50-$3.50 apiece. Broodstock may also be valued as part of the assets of a company at sale, i.e. their future sale potential over the next five to 10 years.
Cover photo credit Amy Kerk, Getty Images
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