A written business plan is an important tool for running a successful business. Think of this as a roadmap. You can travel without a roadmap, but you're more likely to get lost along the way.
The process of creating a business plan can be an overwhelming task. Is it worth it?
FCC advisors and other experts recommend that farmers create a business plan, but the process can be overwhelming. And sometimes it's hard to determine value. Is it a worthwhile investment?
The answer is the same whether you're starting a new farming business or managing an established operation. A business plan is a worthwhile investment.
Here are six reasons why creating a business plan is important for your agricultural business.
1. Provides clarity and direction
A business plan helps you set strategic and financial goals and objectives that ultimately guide your decisions and operations.
“It helps create focus, and focus improves business performance over time,” explains Joel Bokenfohr, FCC Business Advisor.
Using a plan to regularly review and monitor your progress also helps you stay accountable to your long-term mission and vision.
2. Get everyone on the same page
FCC Senior Relationship Manager Nathan Janzen believes improved communication is a key benefit of business planning. When he shares his business plan with his team members, he can answer their questions and help everyone understand the business better.
For example, the ownership and control section of your written plan clarifies roles and responsibilities, helping you manage expectations and improve relationships with farm staff.
3. Improve risk and financial management
Creating a business plan involves identifying and assessing risks, analyzing your financial situation, and calculating forecasts. These exercises will help you gain a solid understanding of the farm business, allowing you to make more informed decisions when opportunities and challenges arise.
“Doing the math often helps you remove emotion and make logical decisions,” Bokenfall points out.
4. Helps secure funding and attract investors
A business plan proves the viability of your agricultural business and demonstrates your business management skills to financial institutions and potential partners.
Whether or not it's a formal requirement for a loan application, there is great value in presenting your plan when seeking a loan or investment.
“This speaks volumes about management,” Janzen said.
5. Increase your confidence and sense of security
In a national survey by Farm Management Canada, 88 per cent of farmers said following a business plan helps them cope with stress and gives them peace of mind.
A strong understanding of the potential of agribusiness and the knowledge that a comprehensive roadmap is documented also gives you confidence.
6. Supports smooth transition
In Bokenfohr's experience, having a business plan is extremely beneficial for transition planning.
“This is a tool that improves the way families communicate and make decisions,” he says, adding that numerous business planning components complement transition conversations.
Are you ready to get started?
A variety of resources can help you start or update your farm business plan. While Janzen and Bokenfohr encourage farmers to be hands-on in developing and creating plans, agricultural advisors can also help.
Download FCC's free business plan bundle to access guides, templates, and sample plans.
Article author: Rebecca Hannam
