Make time for business planning
In the midst of milking cows and making hay, management activities, like working on a transition plan for the farm or writing up an animal welfare policy, are frequently set aside. That is why it is so important to schedule time (ideally weekly) to work on these strategic activities. Just like an exercise program, it takes discipline to commit to a regular time to work on farm business management.
Management of your business is important. By carving out time to regularly work on your business strategy and goals, you set the course for your farm and can proactively respond to changes. This can help your farm to survive in the future.
Every farm needs a business plan
Are you new to farming? Or expanding or making major changes to your farm?
A business plan is a statement of business goals and a roadmap to how those goals will be achieved. Think of it as a blueprint for your farm. It sets the direction of where your business is headed in the future.
By creating a plan, you can effectively communicate what your farm is about to others. Do you farm with family members? A business plan can help all of you discuss and align on goals for your farm. Do you work with a lender? Your farm’s plan can be shared with your lender to help them understand your farm’s vision and goals.
It takes time to write your first plan. After you have a plan in place, though, it becomes a living document. If you want to make changes to it, it is easy to update. Because it is an important piece of your farm’s business, you or your leadership team should write this document. You know your business best and can best describe its goals.
There are several sections to a business plan:
- Executive Summary: I like to think of this as the bow on a gift. It wraps everything up and presents it in an easy to understand format. Often times this may be the only section that is read. It is here that you will want to summarize your business and its goals.
- Business description: This is a great place to start. Many people find this to be the easiest section to write because you simply write about your farm. For example, you may write about the size of your farm, where it is located, what you produce, your ownership, or your history. Think about what you would want someone to know about your farm as you write this section.
- Production management: Some people call this operations management. This is the nuts and bolts of how you run your farm. In this section, you describe what you produce and how you produce it.
- Personnel management: Here you describe the organizational structure of your farm. You may laugh, thinking, it is just me! That is okay. Write that you are the sole proprietor and list any help that you have. If you have a profitability team or advisory committee, include them too. For larger farms, list your employees. Describe the different jobs on the farm and each person’s responsibilities.
- Marketing management: This section can be about how you sell your grain or milk. For most dairy farms, this is the place to write about who your customers are and your selling strategy. You can also include an analysis of market trends or describe your dairy’s competitive advantage (e.g. being organic or grass-fed).
- Financial management: If you are creating your plan to request a loan from your lender, you will want to include financial history, financial projections, financial statements, and your capital request. It may be helpful to include benchmarks against other dairies that are similar to yours. You can illustrate how your farm can financially handle an expansion or change.
Tools to help you plan
There is a great tool available from the Center for Farm Financial Management at the University of Minnesota called AgPlan. This tool will help you create your own business plan for your farm. There are tutorials and resources available that provide in-depth detail on each of these sections. It can help you determine what you want to include in your plan. It also allows you to share your plan with others, so that you can edit it between family members and business partners.
By completing a business plan, you begin to shape your farm’s strategy. This exercise will help you identify where to spend your management activity time. Take time every week to work on becoming a better manager. With discipline, you will find the time to do this and your farm will benefit.
September 23, 2017