This article will attempt to demonstrate that a very profitable business can be established with limited funding. Once that has been established, it becomes clear that option 3 can work in the U.S. without adding additional value from processing into a product needs study and will not be further discussed in this article.

Let's start with some assumptions

1. Purchase 5 suri alpacas as a starter Package.
2. Package will consist of the following

• 2 bred females (1 white, 1 fawn)
• 2 weanling females (1 white, 1 bay black)
• 1 show/herd sire quality yearling male

3. We already have property (at least a couple acres fenced) and a small barn.
4. We need to borrow 45% of the funds to get started.
5. We can depreciate our suri alpacas over 5 years.

Cost of our 5 Peruvian Suri Alpaca Investment

Bred White Female Suri
Bred Fawn Female Suri
Weanling White Female Suri
Weanling Bay-Black Female Suri
Yearling Show Winning Colored Male
Total

Package Discount (10%)

Investment in Suri Alpacas

$22,500
$25,000
$15,000
$25,000
$22,500
$110,000

$11,000

$99,000

Based on our investment, let's prepare a three year projection
Assumptions for the three-year projection

1. $99,000 spent on alpacas
2. $11,000 spent on equipment including scales, internal fencing for barn, medical supplies, ect.
3. Have $15,000 available for operating funds.
4. The total of the above in $125,000, and you have cash available of 70,000.
5. Borrow $55,000 from bank at 9.50% (prime +1) over 5 years.
6. Females are first bred at 15 month and 90% of the eligible females produce a cria.
7. 50% of offspring are males and 50% are females.
8. On average, a young female suri sells for $15,000, and, on average, a young male suri sells for $5,000.
9. Only purchased alpaca are insured at 3.25%.
10. Assume federal and state tax rate of 35%.
11. Assume 5-year depreciation combined with section 179 allowance.

*Net Cash Flow is net income plus depreciation, plus tax refunds and less principal loan payments.
(see below)
**Tax Shelter is running out, time to buy more alpacas.

Starting with our original cash investment of $70,000, note that after adding up our cash, equipment after depreciation, on loan balance and our inventory of alpacas, we now have a total value of $94,325 at the end of the first year: this computes to a 35% rate of return. In the second year, we generated a 39% return, and the third year a 25% return. Right away, the question should come to mind-why the reduced return in the third year? The answer is that year now have a partner -Uncle Sam. You are so successful that he is no longer giving you tax refunds or tax reductions. Instead, you have started to pay him.

The solution to the reduced return is as follows. Now that you have been in business for 3 years and have proven you are a successful breeder, it's time to visit your local banker. Show him the results of your success and borrow money to expand your business.

The desire to own the wonderful, rare and beautiful suri alpaca can be a great lifestyle and a very rewarding business. With less than 1% of the world population of alpaca declining suri and declining yearly, the potential is unlimited for the limited number of dedicated suri breed breeders in the United States.

Jack Donaldson is a former president of a large regional bank and also a CPA. He served on the AOBA. Board as Treasurer from June 1996-2000. He is very involved with the Suri network and serves on its Marketing Committee. He is CO-owner, with his wife Miriam, of Alpaca Jack's (419)423-3890; alpacajack@aol.com