Business Plansto Guide, Lead and Follow

Heather Gessner

McCook County Extension Educator

Mark Major

Jerauld County Extension Educator

South Dakota State University

Cooperative Extension Service

What is a Business Plan

• It is an ongoing process that begins with the identification of values and ends with strategic planning to address critical management functions

• “Business planning is a critical component to any operation. Even though a ‘seat of the pants’ approach to farming might work, it takes to long to figure out if a decision is a poor one; you can waste years doing the wrong thing when you could have done the right thing.”

---Greg Reynolds, Riverbend Farms

Who should take the time?

• Beginning/Starting Farmers• Families farming with older children or

that want to bring children back to the operation

• Marketing Groups• New/Value-Added Product• Lender/Investor information• Holistic

If you are planning on:

• Changing management practices

• Expanding the operation

• Incorporating more family members or business partners

• Transferring or selling the business

• Adding a value added component

• Adding a new business venture

Who puts this thing together?

• YOU DO– Anyone with a vested interest in the

operation should be invited to add their input

Family members

Employees

Partners

Renters

Other producers

Landlords

Customers

Resource organizations

Input dealers

Lenders

Community members

Technical experts

Building A Sustainable Business

A Guide to Developing A Business Plan For Farms and Rural BusinessMinnesota Institute for Sustainable Agriculture

Parts To A Business Plan

• Cover• Executive Summary• Table of Contents• Business Background (History and Business Mission• Current Situation)• Vision and Goals• Key Planning Assumptions• Marketing Strategy• Operations Strategy• Management and Human Resources Strategy• Financial Strategy• Projected Income Statement and Cash Flow• Appendices (Relevant support info.: market research,

resumes, brochures, letters of recommendation, tax returns etc.)

The Three Questions

• Where did I come from?

• What is my current situation?

• Where do I want to go?

Business Plan Guides the BusinessThrough Its Life Cycle

START/BEGIN

GROWTH

CONSOLIDATE

TRANSFER/SELLFinancial Management in Agriculture, 7th ed., Barry et al., 2002

Through all those stages business owners need to keep in mind the “BIG 4” Management Areas

Marketing

Operations

Human Resources

Finance

Where Do We Start?

1. Identify Values• What is important to you?

• These are not goals.

Identify the values that bring everyone together.

Personal values need to be combined with the values of the whole team.

Personal Values

“Because our health is directly tied to the health of the environment, we strive to produce healthy dairy and meat products by utilizing sustainable methods in their production…”

----Cedar Summit Farms

2. Review History and Take Stock of Your Current Situation

• What is my current situation?

Document your business history and take stock of your current situation.

Relay as accurately as possible these facts.

Current Status

• Current market assessment

• Working assets

• Crop/Livestock production systems

• Human resources

• Family situations

• Financial documentation

• Risk Management

SWOT Analysis

Analysis of your operations:

• Strengths

• Weaknesses

• Opportunities

• Threats

3. Clarify Your Vision• Where do you want to go?

• What are your goals?

Clarify a future vision for the business and develop goals and a mission statement that reflect the values you have identified.

Where do you want to go?

• Expanding

• Exiting

• Ownership change

• Production changes

• Vertical integration

• Business Mission Statement

4. Strategic Planning and Evaluation• What routes can you take to get where you

want to go

Development and evaluation of strategic marketing, operations, human resources and financing alternatives is the largest and maybe the hardest part of the plan.

Strategic Planning & Evaluation

• Value added products

• Inventory management

• Marketing plans/Risk Management

• Production systems

• Permits, Policies, & Regulations

• Resource allocation/Human resources

• Executive Summary

Executive Summary

• Most important part of the Business Plan• Typically includes

– Identity– Location– History– Ownership– Industry and competition– Product– Marketing– Human Resources– Finances

5. Present, Implement and Monitor Your Business Plan

• Which route will you take and how will you check your progress along the way

Pull everything together into a formal, written plan that can be used as an in-house tool, to obtain credit, help everyone remember where you want to go.

Implementation

How are you going to create this beast?

• Outline

• Implementation to-do list

• Monitoring list

• Tasks and Workload breakdown

Tying it all together

• Look at where you’ve been

• Decide where you are

• Figure out where you want to go

• Compile facts, figures, and resources

• Implement and monitor progress

USE IT!!

• The biggest part of this process is to use the Business Plan

• Make it available

• Revise it as needed

• Reevaluate your goals and checkpoints

• Don’t use it as a bookend!