Farm business planning has always been a popular topic among advisors and management professionals. However, statistics show that uptake by farmers remains slow. However, companies that use written business plans are reaping the benefits. Follow these eight steps to get started.
– April Stewart, Associate Editor.
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if you are an enthusiastic person country guide Readers will know that farm business planning continues to be a popular topic among advisors and management professionals.
Since Farm Management Canada released its “Sound Minds, Healthy Farms” study last May, we have been working with farmers across the country who regularly utilize and benefit from written business plans. I've been talking.
This winter, we explore how the farm's business plan drives Hannah Konschuh's day-to-day activities, how putting a plan on paper for the first time was a game-changer for the O'Rourkes family, and how planning shared a story about how focusing on specific elements of the Cronin family brought stability to the Cronin family. In times of uncertainty.
Statistically speaking, these farmers are a minority. It was found that 74 per cent of Canadian farmers do not have a written plan.
But now that you know more about this management technique and how it can contribute to financial success and improved mental health, you may perhaps be thinking more about launching your own plan. Or maybe you're new to the driver's seat of your family business and looking to implement new management techniques.
Regardless of the current situation, big questions remain. The question is, “How do I get started?”
Set strategic goals
For Kim Gerenser, senior manager of MNP's farm management consulting team, the first step is establishing clear, specific goals.
When guiding clients through the business planning process, he first asks them about their goals. More often than not, his questions are met with blank stares.
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“Starting to develop a business plan is probably the most difficult step in the entire process, because the business owner has to decide what they really want to accomplish,” says John, who is also president of the Canadian Association of Agricultural Advisors (CAFA) Gerenser says.
For example, setting a goal of making as much money as possible is not specific enough. “What do you want your agricultural business to look like in five, 10, 20 years? Is your goal in 20 years to pass it on to the next generation?” Gerenser asks.
To break down this task, he suggests starting with short-term goals and assessing what equipment and infrastructure needs attention over the next five years.
“Defining goals is very difficult, but without this clear first step, the planning process is doomed to fail before it even begins,” he says.
Evaluate your business
The next step is to conduct an internal audit, an honest assessment of the current state of your business. This not only means assessing the financial situation, but also the current status of the farm in terms of management capacity, production capacity and human resource capacity.
In addition, Gerenser adds that family support and the physical and mental health of key owners and custodians need to be assessed.
“What are your strengths? What are your limitations? Where is your business excelling? Where is it struggling?” he asks. “You need to get a clear snapshot of where you are on day one so you know what you’re working on.”
Heather Watson, executive director of Farm Management Canada, recommends using an online farm business self-assessment tool. She advises having multiple members of the management team complete the assessment so they can compare the results before continuing to support the planning process.
The analysis completed at this stage can be used to evaluate previously set goals. If your goals are not realistic given the available resources, you can reconsider the first step in the process. “This doesn't mean you need to change your goals, but you can perhaps add new short-term goals with extended duration and increased resources,” Gerenser explains.
Plan your implementation
Once the assessment is complete and achievable goals have been identified, it's time to decide which tactics need to be implemented.
Gerenser says this is the stage in the planning process where many people run into roadblocks. Identifying what changes need to be made within your business can be difficult and can create inertia.
If this is you, he emphasizes the importance of asking for help. He recommends first seeking advice from an accountant, lawyer, or banker – an advisor who has not only seen many business plans but also knows your business.
“It's very important to ask for help, but don't just make one phone call and call it a day,” he suggests. “Make several calls to get a variety of opinions so you can make the most informed decision possible.”
For example, if your goal is to grow your business by 15% over the next 10 years, but you recognize cash flow as a challenge, an advisor like Gerencser may be able to help. Initially, he was able to analyze cash inflows and outflows, but his findings may lead to the involvement of other advisors.
“If gross margins aren't good enough, I can point that out, but I'm not an agronomist, so I probably can't help you fix it,” he explains. “If your operating expenses are too high, we can help you identify strategies to fix them, but if your overhead costs are too high, you may need to involve your banker.”
write it down
When developing strategies and tactics, it is important to document them. Many advisors, state departments, and organizations such as Futurpreneur have their own business plan templates, but it's important to note that not all sections will be applicable to your farm.
Gerencser suggests that part of an honest evaluation may be identifying which parts of the business plan are important and which parts don't apply to your situation.
Watson agrees that business planning comes in many forms, and the best planning resource will depend on the format and functionality you are looking for. Above all, she points out that a solid plan includes both strategic and operational elements.
“Some people may forget about the strategic part and think that a business plan is the same as a budget,” she says. “Budgeting is part of it, but setting the vision, goals, and priority activities to achieve those goals is key to creating operational elements.”
Gerenser knows the planning process is difficult. This is not the type of project you can tackle in an afternoon and requires a lot of effort, especially if you are creating a plan for the first time.
Still, he doesn't doubt there's value in having a written plan. “The immediate and future benefits of going through this long and sometimes difficult process can be enormous,” Gerenser said.
What does the plan include?
A written business plan is an important tool for running a successful farm business. The required components will vary by company, but here are eight sections that most farm business plan templates include.
1.executive summary
A concise summary of the main points of the project and the purpose of the plan.
2. Business and Ownership Overview
A description and overview of the company's past performance and growth plans. This section includes the composition of the owners and the qualifications and experience of each owner.
3. Strategic planning
Present your vision of what you want your business to be in the future and your mission of what you are currently working on to make it viable and sustainable. This section includes an analysis of internal and external strengths, weaknesses, opportunities, and threats (SWOT) and includes an overview of key performance indicators and a list of short-term and long-term goals.
4. Marketing plan
Describe the industry you operate in, what products you sell, who your target customers are, the quantities you plan to sell, and the distribution channels you plan to use. If applicable, this section may include steps for attracting and retaining customers, as well as strategies for pricing and promoting your products.
5. Production planning
I will explain the outline of the business. Describe the resources needed for production, the production process, key inputs, and basic cost structure. This section is sometimes called the operational plan.
6. Human resources planning
Present the organizational structure, including key employees and their educational background and experience. This section includes strategies for recruiting, hiring, training, and disciplining employees. Salary and compensation details, labor policies, and succession planning if applicable. Please name any external advisors who play a role in the management of your business.
7. Financial planning
This section details the business model for generating revenue. For existing businesses, include financial statements for the past five years and monthly cash flow projections for the next year. For new businesses, include financial statement projections for the first three years of operation and monthly cash flow projections for the following year. Financial statements should include an income statement, balance sheet, cash flow summary, financing schedule, and key ratio analysis.
8. Risk management and contingency planning
Provides an assessment of potential risk events or incidents and describes current processes and detailed management response strategies for identifying, measuring, and managing risks.
source of information: Alberta Ministry of Agriculture and Forestry. Farm Credit Canada. Ontario Ministry of Agriculture, Food and Rural Affairs.
– This article was originally published in the April 2021 issue of Country Guide.
