The thought of creating a business plan for your farm can be daunting, but this document serves several important purposes. For starters, it may be required by a lender when applying for financing. It can identify farm needs and help strategize for the future. A business plan can also be used to help tell your story or pitch your idea to a potential funder or partner.
“A business plan explains who you are, what you do, and how you plan to do it,” said Jamie Rahrig, an academic specialist with the Michigan State University (MSU) Center for Regional Food Systems. During an MSU “Funding your future” webinar, she explained that a business plan is a living document that should not be written once and put on a shelf; continue to update and review that plan as your business develops.
“It is a really great tool to use as the business grows,” she said. “An up-to-date business plan can help you be ready for changes that are likely to come.”
Melissa McKendree, an assistant professor at MSU, recognized that writing a business plan can be intimidating, but she said you don’t have to be a great writer to get it done. “They take time, so we encourage you to take it bit by bit,” she said.
During the webinar, McKendree highlighted the main sections of a business plan. The first is the cover page, which is how you want to introduce yourself to the lender. That would be followed by the table of contents, which helps readers locate specific components of the plan.
Next comes the executive summary, but McKendree advised writing this section last. “This is the ‘Cliff notes’ version of your business plan,” she said. Highlight the main details and summarize the other sections of the business plan once they are complete.
The business description is a good section to start with, because McKendree said this is likely information you already have in your head that simply needs to be communicated to others in writing. This includes an overview of the business, a history of how the farm was started, and the legal ownership structure of the farm. Also described could be your personal history, past or current customers, and your sales strategy.
The next component is operations; simply, this is how your business operates. McKendree said this could be a lengthy section with many subsections. Areas included here are licenses needed, a description of the products sold, and potential risks. It can feature ways you engage with consumers, how you ensure quality control, and what is done to manage inventory. This is also an area to discuss expansion plans, such as timeline, estimated costs, and potential obstacles.
The marketing plan describes your ideal customers and market trends. The market analysis can be done by yourself or by a hired consultant. In this section, highlight what makes your product unique and how it creates value for the customer.
In the management and organization section, explain who owns the farm. Share your personal work experience and that of other partners. List current employees and their roles and share any plans to add employees.
The financial plan can be another intimidating section. McKendree said to identify financial challenges and opportunities. Three aspects of the financial plan are the balance sheet, which balances your assets with your liabilities and owner’s equity; an income statement, which reports profitability over a specific time period; and cash flow projections, which is a series of monthly or quarterly budgets estimating cash receipts, cash payments, and borrowing requirements.
Finally, add an appendix to the business plan to provide any supporting information.
The daily demands of farm work may make it very difficult to find time to sit down and do paperwork, but an updated business plan can shape your future. Writing down goals and dreams is the first step in helping them become a reality.
The author is the senior associate editor and covers animal health, dairy housing and equipment, and nutrient management. She grew up on a dairy farm near Plymouth, Wis., and previously served as a University of Wisconsin agricultural extension agent. She received a master’s degree from North Carolina State University and a bachelor’s from the University of Wisconsin-Madison.