If you fail to plan, you plan to fail, so the saying goes. Regardless of the size of your farm when starting out, whether operating a small truck farm that sells produce at a weekly farmers’ market or a farm with multiple enterprises that support your entire family plus some part-time employees, getting a plan down on paper is essential to your success.
Undoubtedly, when beginning farmers get started, it’s their passion for feeding the world good food and taking care of the land that drives their ventures. However, farming is a tough business, and without a solid business plan, it can be difficult for a first-time farmer to make ends meet.
Preparing a business plan can feel a bid tedious, especially if you don’t spend much time typing on a computer. Great news, though, is business plans tend to follow a fairly common format, and there are numerous templates that can be adapted for your own use. Depending on the source, business plans can be structured in different ways, but each seeks to accurately depict what your business is all about in both words and financial numbers.
“A good business-planning process will put you through the paces of assessing the realities: exploring markets, looking at your assets, and thinking about what you can realistically do with your time and skills,” says Jody Padgham, editor of Fearless Farm Finances: Farm Financial Management Demystified (Midwest Organic and Sustainable Ed Service, 2012). “Even if you never show your business plan to anyone else, it will be very valuable in helping you think your farm business through from every angle.”
Lay It Out
The best plans are those that are constantly revisited, revised, and that incorporate changes in the business environment or marketplace as they occur. In other words, don’t write a plan only to shelve it with the receipts for chicken feed.
There are seven basic units of a business plan, each serving a role to clearly direct your operation’s course of action over the next three to five years. In cases where you’re soliciting investment or loans to start your business, being accurate, realistic and complete in your descriptions and financials could be the difference between getting some start-up capital or not.
- Executive Summary: A one-page overview of your operation, usually written after your entire plan is completed. Included in this section are your objectives and mission. Think of it as a brief “elevator pitch” and distilled summary.
- Company Summary: Provides the basic information related to ownership, company structure, mission and objectives, plus start-up specifics and costs.
- Product and Sales: Describes the products you’re growing, harvesting, producing or raising on your farm and any other diversified aspects of your operation (e.g., a farmstay or U-pick operation). Remember to cover what you sell, as well as how or in what ways your products or services benefit your customers. What needs does your business meet?
- Market and Competitive Analysis: This section details both the competitive marketplace related to your products or services and the market niche, target market segment (your anticipated customers) and positioning of your products in relation to the competition. For example, will you be selling direct to customers or wholesaling to restaurants—or both? The narrowing of your market to the most promising and profitable one is called segmentation. It’s important to incorporate any research or trends that support your decisions.
- Marketing Strategy and Sales Forecast: By focusing on your competitive advantage, say pastured beef or organic small fruit, you can devise a marketing plan that can include both advertising and public relations efforts. Covered in this section is your sales forecast, usually three to five years out. Many plans also include key milestones, to measure business progress, such as the completion of a greenhouse or securing the targeted 75 CSA member sign-ups in year one.
- Management and Payroll: Explain the operations of the farm from the perspective of who is doing what. Define salaries and number of part-time employees you plan to hire.
- Financials (Profit & Loss Forecast, Cash Flow and Balance Sheet): To be considered a business, according to the IRS, your business must make profit three of every five years. In the financial section, you paint a picture of your farm with numbers, creating a pro forma profit and loss statement, cash flow chart, and balance sheet that reflects your business assets, liabilities and net worth. Income minus expenses equals profit, the ultimate measure of a successful business that’s found in the profit and loss statement. Without profits, you won’t be in business for long. A cash flow statement addresses sources of and uses for funds for your business by year.
Get It on Paper
It’s the process of writing the business plan that’s often the most valuable. Writing a business plan forces you to evaluate every aspect of your enterprise and get these details down on paper.
“Farmers are inspired people and love to see where their desires take them,” Padgham says. “The ability to respond to changes and be ready for new things is what makes a good farmer great. Taking the time to think a farm though from beginning to end, as the process of business planning does, can put you on the path to success more firmly than just making decisions as they come at you.”
Fortunately, there are plenty of free online resources that guide you through the steps of writing a business plan, from a vision statement to the profit-and-loss statement. Among some of the better ones that allow you can customize for your needs include:
Specific to the farming community:
- Cornell University features sample business plans for a dairy goat business and carrot farm.
- Bplans.com shares a produce farm business plan.
- AgPlan through the University of Minnesota supports a variety of rural business owners to develop a business plan.
In addition to the in-depth, face-to-face business-planning workshops often offered at various national farming conferences, the Association for America’s Small Business Development Centers provides a small-business assistance network throughout the United States to help new entrepreneurs, including farmers, realize their dreams of business ownership. Small-business owners and aspiring entrepreneurs can go to one of more than a thousand local SBDCs for free, face-to-face business consulting and at-cost training on writing business plans, marketing or regulatory compliance. BeginningFarmers.org also addresses a wide range of topics related to farm business-plan development.
Don’t be afraid to bring your ideas to the table, but avoid jumping into a business before thinking it all the way through. With careful analysis of the marketplace and a plan in hand, you can turn your love of the land into a successful enterprise.
Get more farm business help from HobbyFarms.com: