Seven vital components of a farm business plan (Credit Corner)
The best way to set yourself up for success both in business and with your lender or partners is to have a detailed plan. It doesn’t need to be pretty, but you do have to prove that you’re willing to put the time and effort into creating a well-thought-out course of action for your operation.
Already operating but don’t have a plan?
That’s OK! It’s never too late to put extra thought into how your operation will continue to fulfill your livelihood.
There are seven components to an ag business plan that we’ve outlined below to set you up for success:
• Title/ cover page: Keep it simple on the cover page. The most important information here is accurate contact information so readers can get in touch with you easily. Include the business’ mailing address, phone, email, and fax if you have it. Your company’s logo would also go here!
• Executive summary: Although it will be the first page of your plan, this will be the last section that you write summing up all of your key points in your plan. Remember that this is the first section that your business partners or lenders will read, so they’ll expect to see all of the highlights that make working together a good financial decision for you both. Include points about expansion plans, market opportunities, financial trends and projections in a short and easy-to-read summary.
• Introduction: Treat this section as if you’re telling a stranger about your operation and you want to give them an overview of what you do and what sets you apart from other businesses in your industry. Start with a brief description of the operation including what you do, what you produce, how you market it, and the size of the operation. Then go into details on the locations and facilities, mission statement, goals, and capital request. If you’re starting a new operation, include a plan summary that describes how you’ll start the operation and the course of action you’ll take to build it.
• Production: Include in this section the products and/or services and their corresponding systems, production practices and value-added practices, policies on quality control, inventory management and customer service, risk management, licenses, permits and regulatory requirements, and goals for production growth and expansion. Be as specific as possible in this area to really explain what you do and how you do it!
• Marketing plan: For this section in the business plan, give an industry description, outlook, trends and projections, any target market information and the market share to gain for your operation, pricing (mention competitor research here), promotions, programs and marketing tools, and distribution.
• Organization and management: Here is where you get to describe how your business is organized (corporation, partnership, sole proprietorship, etc.).
Include the names, titles, and positions of owners, managers, directors, etc., the organizational chart or personnel plan (who facilitates which roles and potential new hires), any benefits offered or rewards structure for employees, and a contingency plan.
• Finances: Be sure to include your income earning potential, plans for growth, expansion, and industry trends here. Lenders also like to see historical performance (3-5 years if you have it), a balance sheet, cash-basis income trend, breakeven analysis, and sensitivity analysis. Asset management, benchmarks, and describing your capital request are also appropriate here.
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If you have supporting documents for any information described in your plan, attach it to the end in an appendix and describe each attachment in the order it is included.
If you have any questions on how to complete your business plan or more specifically what loan officers are looking for,
Farm Credit has a free webinar on Sept. 15 for a walk-through of our business plan template at mafc.com/event/write-farm-business-plan and get your downloadable copy to use for your operation.