When you read the title of this article you might be thinking, “What? A farm doesn’t need a business plan. You grow veggies and sell them. What do you need a plan for?”
If only it were that easy!
The truth is, a farm is a business. As much as we may not want to think about the plants we cultivate and the soil we work as a business per se, it is.
I mean, we have it pretty good, working outside and being our own boss, not stuck in a stuffy office building somewhere, but regardless, a business plan is a must.
Now, I will be honest here, one of the top reasons that I am writing this article right now is because my husband Jon and I have been procrastinating writing our business plan.
We are starting our farm this year (2021), and although we have plans in place, we haven’t yet tackled a business plan.
My goal for this article is to outline the importance of writing a business plan in hopes that it motivates you (and me!) to do so if you haven’t already.
I will be referring to The Organic Farmer’s Business Handbook by Richard Wiswall for much of the information provided in this article.
Let’s do this!
What Is A Business Plan?
A business plan is a thoughtful representation of you, your farm, and your future plans. It is a road map of where you want to go. Your destination is somewhere off in the future with unknown turns.
You begin by plotting your course from where you are right now and you consider various routes to determine the best one to reach your destination.
A farm business plan is designed for you. The thinking that goes into a business plan and the information represented there will help you get to where you want to go.
How Do You Start A Business Plan?
You can think of writing a business plan like a mullet if you will. It has two parts. The business is in the front (numbers and spreadsheets) and the party is in the back (brainstorming and writing).
The party in the back component of the plan is the fun part, it’s the brainstorming and idea-generating time.
Take your time to reflect on what direction you want your farm to move toward into the future. Write out all thoughts that come into your head, you don’t want to forget them.
Writing your thoughts and ideas down on paper makes them more real and easier to remember when you are reviewing them at a later date.
Now let’s get to the front, or business, part of the plan. This is where we talk about numbers.
A business involves income, expenses, and profits. These are all expressed in numerical form.
Business plans speak in the universal language of figures, often in three common forms: a Profit and Loss Statement, a Balance Sheet, and a Cash Flow Projection.
Now that we know that business plans require both the written word and numerical components, let’s take a closer look at what is required with the party in the back, or, the written word component.
Business Plan Writing
There are three topics in the party section of the business plan.
They are description, analysis, and planning.
Business plan writing can be a lengthy or short exercise. A complete plan may be only 5-10 pages from start to finish, including financial forms (numerical component).
By all means, your plan may be longer, that’s quite alright. This is your roadmap, remember.
The more involved you are with its creation, the more ownership you will feel with your plan.
Business Plan Outline
Here is a basic outline and overview to help clarify what components you need to include in the party (written) component of your business plan.
Cover Page
Includes:
- Your farm name in bold letters
- Farm address
- Phone number
- Website
- Email address
- Date
- Author(s) of the business plan
Table of Contents
This can be done after the business plan is written and includes all the components in this outline.
Executive Summary
An executive summary is a short encapsulation of what the business plan is about.
It answers questions such as:
- What is its focus?
- What important issues face the farm?
- What changes are proposed?
Richard, the author of The Organic Farmer’s Business Handbook recommends including a farm mission statement that puts the big picture front and centre.
Descriptions
The basic farm description can be one to three paragraphs long, expressed in words that are right on the tip of your tongue.
You know your farm best, how would you describe it to someone else?
This may include what you sell, when you started, what scale is your farm, and how production has changed over the years.
Also include current marketing efforts to show what you are doing now for promotion.
Analysis
Start by brainstorming ideas for your SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats).
Here are some examples:
Strengths: Location near a good market, fertile soil, energetic management
Weaknesses: Lack of irrigation, lack of labour, rocky ground
Opportunities: New organic retailer opening in town, land lease becomes available, localvore movement thriving
Threats: Competition in the marketplace, higher energy costs, new regulations
Look at your long list of SWOT items and organize them.
These items will be the foundation of an action plan for your farm. Look at each category and try to condense all the items into one sentence. Do this for each category.
Management Analysis
Evaluate the human resources that run the farm business.
- Who does what in managing farm production, finances, employees, and planning?
- Are skills sufficient or do some areas need attention?
- If professional development training would help, specify what types and for whom.
Market Analysis
Look at the current status of each marketing venue and ask what will likely happen to it in the future.
- Is the demand for product steady, gaining, or shrinking?
- What are the prospects for sales prices?
- Assess your competition; will it affect your business?
- How will your product be distributed and promoted?
Enterprise Analysis
This should begin with your top sales items to make sure they are profitable.
Take the time to do a few simple budgets to see where the money is currently flowing.
Planning
This section is the road map to possible changes to your farm business.
- What ideas and plans surfaced when you completed your SWOT analysis?
- What strategies do you want to try?
This section encompasses the heart of your business plan and its overarching purpose:
What is the focus of your plan for the future?
Review your strengths and opportunities and use them to your advantage. Address issues identified as weaknesses and threats, and look at possible countermeasures.
A good idea is to plan specific dates as to when you want tasks to be completed. Also note who is going to do it, how much time it will take, how much money will be needed, where the money will come from, and how the proposed change will affect overall farm profitability.
This concludes the written, or party, component of your business plan, let’s move on to the financial statements. AKA the business in the front.
Financial Statements
There are three types of financial statements that speak clearly in the language of numbers.
They are:
- Profit and Loss Statement
- Balance Sheet
- Cost Flow Projection
I am not going to go into a large amount of detail here, just going to outline the importance of each.
I will go into further detail about each statement in separate articles in the future (when we actually do ours!)
Profit and Loss Statement
Also called an Income Statement.
A Profit and Loss Statement lists all types of income and expenses for the farm and the resulting net profit (or loss).
Profit and Loss Statements always cover a specified period of time.
Often the time period is the calendar year of January 1 through December 31, but other time frames are possible, like quarterly or monthly statements used for closer monitoring of finances.
Example:
Balance Sheet
A balance sheet lists what you own (assets), what you owe (liabilities), and what is left over (net worth).
Unlike a Profit and Loss Statement which covers a span of time, a Balance Sheet measures assets and liabilities at a specific moment of time, like say right now.
The net worth from different year’s Balance Sheets can be compared to see if you are gaining or losing financial ground over time.
Example:
Cash Flow Projection
Cash Flow Projections look like Profit and Loss Statements, but with future years tacked on.
Depending on changes you plan to implement, sales of various products will go up or down, as will different types of expenses. These changes will affect your bottom line or net profit.
Projections are educated guesses of the future, and because you don’t have a crystal ball, you must plan as best as you can to achieve your goals.
Example:
Why Do Market Gardeners Need A Business Plan?
Although you can keep your plan to yourself, there may be occasions when you want to show others at least a snapshot of your business.
For example, a banker may need to see your plan if you want to borrow money.
A potential business partner, investor, or family member may also want to see your business plan.
Heck, maybe you are so proud of it you want to show off to everyone you see, ya never know!
As well, your business plan will help guide decisions in the future for your farm. It will help you take the right steps toward fulfilling your future goals.
What Resources Are Available To Help With A Business Plan?
Creating a business plan is not an easy task by any means. You may want to consider bringing in a friend or hiring someone to help you.
Often there are resources in your community to help guide you through the process.
Try googling ‘small business plan resources in [your area]’
This should provide you with a list of resources your community provides for small businesses. Oftentimes these services are free, so be sure to take advantage of them!
In Summary
Writing a business plan is no walk in the park, that’s for sure, but it is a vital part of your farming business.
If you are procrastinating writing one like we are, put it on your calendar and make yourself do it. You need to.
We plan on tackling it in manageable chunks over a period of a couple of weeks. To sit down and plan all in one shot seems like a recipe for disaster!
Also, take advantage of any and all help that is available to you. I cannot recommend The Organic Farmer’s Handbook enough for all the useful information on the business side of farming.
Do you know someone who has experience with business plans? Are there community resources you can take advantage of?
We plan on doing both, asking for help from an acquaintance as well as utilizing resources from our local small business and entrepreneurship centre.
Once you have finished writing your business plan, don’t let it stay dormant, refer to it a couple of times a year at least for future planning and incorporating new ideas and strategies.
Well, I don’t know about you, but consider my butt sufficiently kicked into action!
Our first step is scheduling in time each day to work on our business plan to finally get it done!
If you have already written a business plan, do you have any suggestions for us who are just starting? Please leave any and all helpful advice in the comments below. Thanks!
Stay Local,
Kathy & Jon
your friendly neighbourhood growers
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