If you are starting a new farming business or planning to expand an existing one, developing a business plan is an essential step to ensure your farm’s long-term success. Many factors could affect the operations of a farm during its run, such as rising costs of supplies, weather conditions, economics, and more—which is why creating an effective business plan is one of the first things you need to do when starting or improving an existing farm.
A business plan creates effective strategies that will set your farm operation and will pretty much guarantee success when done right. Plus, it could also be mandatory to get an agricultural business loan. With that said, you should definitely take a look at these 5 useful steps to create a business plan that actually works. Before anything else, let’s define what a business plan is and why you need one.
What is a Business Plan?
A business plan is essentially a plan for your business that documents a description and overview of your company’s future. Consider this as a roadmap for your farm that explains your farm strategy and your key goals to take your business to the next level. It includes all the processes, like how your farm will operate and make money. This comes in handy, especially when you are planning to get loans for farmers and create a business that provides you with financial freedom.
To create a successful business plan, you need to make sure that it is simple, specific, realistic, and doable. It’s essential that you cover all the aspects of your farm. Contrary to the popular belief that a business plan is required for new farms only, it is advised that you prepare a business plan for every fiscal year to ensure that your farm is growing and making profits.
Components of a Business Plan
Mission Statement
A mission statement is used by businesses to explain their purpose(s) in simpler and more concise terms. It may range from one sentence to a short paragraph explaining your culture, values, and ethics. It can serve several purposes, including motivating your farm workers and reassuring stakeholders of the farm’s future.
To craft a mission statement, consider how your farm impacts people, stakeholders, or your community and why your strive to help them. Make sure to include the values and the core identity of your farm.
Goals
Listing down your goals is essential. However, each goal you write on your business plan should be attainable within a given time period. Note that you should also include a timeline on when you can reach your goals and specific plans on how to do it.
Background Information
If you plan on showing your business plan to lenders, including all the basic information about your business will help them get to know your business more. Make sure you list down the business address, the area of land, how it all started, and all of your general practices when operating the farm.
Marketing Plan and Strategy
A marketing plan and strategy is an essential part of your business plan. This may include both short and long-term plans for achieving your farm’s goals by understanding the needs of customers and creating a sustainable competitive advantage. Having a solid marketing plan and strategy can help you in getting farm loans to improve and expand your existing farm.
Management Summary
Does your farm include different stakeholders, or is there only one key person to make all management decisions? List down all the names of the people involved in the management and owner’s side of the farm.
Financial Analysis
This section of your business plan should include the financial aspect of your farming operations, including all the money that your farm is bringing in and all the expenses that are involved in day-to-day operations. Performing a detailed financial analysis is also an excellent way to plan and implement new strategies to improve your farm.
5 Tips for Making an Effective Farm Business Plan
Now that you know how to create a business plan, the following tips below will help you create a successful plan that could boost the income of your startup or existing farm. Here’s a bonus tip for you before you continue; make sure you follow through with your business plan. Otherwise, everything you planned will all go to waste.
1. Analyzing the market and competition
Choosing what to grow next can be quite exciting and overwhelming at the same time, but before going out and buying seeds for a specific crop, it is always ideal to conduct thorough market research. The prices of commodities often change, and there is no way to accurately predict which crop will make the most profit. However, by doing proper research and analyzing the market and competition carefully, you can make more educated decisions that will make you the most profit for the season.
Make sure to compare different corps in terms of how much money and time they for production. Analyze which products you can sell that are worth the effort to maximize your profit margins.
2. Strategizing expenses
Farmers should always consider how to make crop production cheaper to make the most income. But with that in mind, you should also ensure that going cheap does not affect the quality of the output in any way. You choose the cheapest prices on raw materials and train workers to follow an efficient system, which can lower expenses.
3. Identifying what your farm needs
It is crucial to analyze the framework of your farm when creating a long-term business plan. Consider the amount of labor, equipment, and infrastructure that will be required to boost production. Make sure that every expense on labor and equipment is justified and essential for the improvement of your farm operations.
4. Overlooking past performance
One of the best ways to improve your strategy is by analyzing how your farm has performed in the past. This will include analyzing your profit margin, asset turnover ratio, return on assets, equity, and sustainable growth rate.
5. Considering an agricultural business loan
Some farms have trouble keeping up because of financial issues. Some farms can drastically improve if given a certain amount of money that could change their trajectory. If your farm is struggling to make profits because it needs improvement that requires a specific budget—the best option is to create a business plan that you can show to lenders. An agricultural business loan could be the key to improving your existing farm or starting a new farm that could turn into a viable business.