By: Val Panko, BSA, PAg, Regional Farm Business Management Specialist
A business plan is a critical component for any successful farm and, in fact, for any successful business venture.
It is much more than a document. It is a reflection of the strategy that has been developed by management to demonstrate how a business will achieve financial success and long-term objectives.
According to the Ipsos Agriculture and Animal Health study “Dollars and Sense,” conducted in 2015, only 26 per cent of Canada’s farmers have a business plan. The study also shows that farmers who have a written business plan they review annually get five times higher returns on assets than those who don’t.
Having a business plan shows banks and other investors that you take your farming operation seriously. It can help to highlight and focus on your goals and help to answer questions regarding your current financial status and your future plans.
Business plans typically include the following sections:
- Introduction and executive summary. Some argue that this section should be written after the business plan is complete. It should be one to two pages summarizing the main topics covered inside the plan. It should include who you are, what you do, future plans and how you will succeed. It should be convincing, as many people who read your business plan will not get past the first few pages.
- Business objectives. This section should outline your long- and short-term objectives, as well as your goals for the business. To be effective, goals should be SMART (Specific, Measureable, Attainable, Realistic, Timely).
- Description of the business and product. Describe your proposed business operation, including your ownership structure, suppliers, location, key employees and labour strategy. Describe the features, functions and marketability of your product. Demonstrate how your product meets the needs of the customer.
- Financial position and projections. Many business plans focus on describing infrastructure and their products but ignore cash flow and their source of funding. Cash flow is crucial to the operation and will be a critical consideration for debtors and creditors. Include financial statements for the past five years and a monthly cash flow projection for the next 12 months.
- Industry and market analysis. Analyze the environment in which you are doing business. Provide a brief overview of the industry and how your business will participate. Include an analysis of competitors and describe your competitive advantage.
- Marketing plan. A marketing plan requires that all aspects of the marketing strategy be considered, including your production, pricing, distribution and promotion plans.
- Risk Assessment. In this section you would want to perform a SWOT analysis; identify your strengths, weaknesses, opportunities and threats. Include potential risks referenced in the previous topics and how you will limit or mitigate them. Be realistic and honest with yourself; nothing is worse than a reader of the business plan discovering risks that the business owner has not identified.
A business plan may include more or fewer sections or may group the topics differently, but the main objective is still the same: to convey what you want to achieve and how you plan to do it.
The Ministry of Agriculture’s Business Plan Guide can help get you started in preparing your own business plan. Sample business plans and templates can also be found at the Canadian Business Network site. For more information, contact the Moose Jaw Regional Office at 306-694-8999 or contact the Agriculture Knowledge Centre at 1-866-457-2377.