The Do’s and Don’ts of Writing a Business Plan · The Do’s and Don’ts of Writing a Farm Business Plan Jenny Carleo Agricultural Agent . Rutgers NJAES Cooperative Extension

The Do’s and Don’ts of Writing a Farm Business Plan

Jenny Carleo Agricultural Agent

Rutgers NJAES Cooperative Extension of Cape May County

Dr. Robin Brumfield Extension Specialist in Farm Management

Rutgers University

Outline • Objectives • Where Do I Start? • What Do I Focus On? • Do’s and Don’ts in Different Components of

the Plan • Additional Resources for You

Objectives • Empower you to write

or improve your business plan

• Prevent pitfalls • Guide you in the right

direction • Provide additional

resources

In this presentation:

• Red light will indicate a DON’T.

• Green light will indicate a DO!

Where Do I Start?

a. The Executive Summary

b. The Mission Statement

c. Brainstorming

d. None of the above

Brainstorm – With your Partners!

• Dream: This is where all of your great ideas come from

• Dream as far as you can for the brainstorming session

• There are no bad ideas when brainstorming

• Sometimes your best ideas come from your employees

Brainstorm

• Write down all of your brainstorm ideas in one place – Keep a notebook/electronic file – Start by narrowing down to 2 or 3

of your best ideas – Expand those ideas fully on paper

What Should I Focus On?

Do:

1) Identify a market need.

2) Produce products that satisfy that need.

At a price customers are willing to pay and will still return a profit to the business.

Do: Answer the questions :

• What demand problem are you solving by being open?

• What sets you apart from the competition from a customers’ perspective?

Do focus on…

• The reader’s perception of your business. • Exciting them with your new ideas by making

sure they are realistic and feasible.

Do Use ‘AgPlan’ for Various Operations

https://www.agplan.umn.edu/


Components of a Plan

1. Executive Summary 2. Mission Statement 3. Business Description 4. Goals & Objectives 5. SWOT Analysis 6. Estate Plan

7. Production Plan 8. Risk Mgmt. Plan 9. Marketing Plan 10.Management Plan 11.Financial Plan

Writing Your Mission Statement

A Mission Statement

• Sets goals and standards. • Looks at the future and asks what kind of

business do I want? • Is a source of inspiration. • Provides clear decision-making criteria.

Mission Statement

• Don’t make it too: – Long – Wordy – Product-centered

Mission Statement

• Do – Write a short concise Mission Statement

that describes the core purpose of your business.

– Use it to unify the people involved in the business around a common direction and purpose.

– Use it as the foundation or measuring stick for making decisions.

Example Mission Statement:

Jalma Farms is committed to a sustainable Native Fruits Orchard while preserving open space and protecting sensitive fresh and salt water ecosystems.

Do hang it up!

Do Use our Factsheet/Worksheet

http://njaes.rutgers.edu/pubs/publication.asp?pid=FS1172

(Rutgers Fact Sheet “FS1172”)

http://njaes.rutgers.edu/pubs/publication.asp?pid=FS1172




Business Description “Dos”

• Focus on describing what makes you qualified to do the work successfully

• Paint your individual counterparts as being equipped to fulfill the mission statement

Business Description • If your staff/management is not equipped,

mention what educational programming they are doing or plan to do to make up for this deficiency.

Or • List other staff you plan to hire to fill this void.

Business Description The goal is to be: • Honest and inspiring • Realistic and hopeful

Business Description

• Don’t stretch the truth on your business plan – Everything in your plan should be 100% true

Garden State Greenhouses Business Description

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• Is a wholesale floricultural business specializing in selling unique, high quality plants to retail garden centers

• The production facility is a 25,000 square foot glass greenhouse.

• I plan to sell bedding plants, poinsettias, hanging baskets, perennials, and garden mums and produce my own plugs and rooted cuttings in the greenhouse.

• I will also produce garden mums outdoors. • The greenhouse sits on a 5 acre tract of land that also

includes a small barn, not currently in use.



7. Production Plan 8. Risk Mgmt. Plan 9. Marketing Plan 10. Management Plan 11. Financial Plan

Goals & Objectives

• Should be: “SMART”

• Use action words first in each sentence: – Increase, reduce, develop, lead, provide…

S

• Specific

M

• Measurable

A

• Attainable

R

• Relevant

T

• Time-bound

Examples of SMART Goals: • Increase sales by 50% over the next five years. • Reduce labor costs by 20% over the next five years. • Maintain the same level of sales, but reduce costs by

5% next year through inventory management and mechanization.

• Increase production by 25% within two years. • Add a new crop which will add $2,000 to sales within

the next 5 years. • Reduce debt by $2,000 per year. • Transfer full ownership to children when current

owners retire within ten years.




SWOT Analysis

• Strengths

S

• Weaknesses

W

• Opportunities

O

• Threats

T

Strengths & Weaknesses are resources within your control – Internal to the

Business • What are the abilities and limitations of the manager and key

employees?

• How modern and efficient is the physical facility?

• How is the soil?

• How close are you to the market?

• What can you do better than your competitors?

• What is the cash flow position of the business?

32

Opportunities & Threats are beyond your control – External Forces

• Market trends

• Consumer demands, demographic, lifestyles

• Strong or weak currency

• Interest rates, inflation rate

• Government policies and regulations

• Labor markets

33

Example of a SWOT Analysis: Strengths

- Ability to respond quickly to customer demands - Knowledge of organic agricultural practices/processes - Personnel with high level of experience - Diversity of product assortment

Weaknesses

- Lacking an initial market presence and reputation - Cash flow is unreliable in the early stages of business - Citrus are high-risk crops that take a longer time to yield

Opportunities - Competitors may be slow to adopt new technologies - Competitors may be less likely to embrace organic crop niche market because of its newness and cost

Threats - Increasing costs of necessary supplies - New competitors in area/inundation of neighboring farms - Unpredictable weather and soil quality




Estate Planning

• The process of planning for the the final disposition of your life’s work.

• Estate planning is as much for them as it is for your peace of mind.

• Anyone who owns a farm and with responsibility for children or parents should have an estate plan.

• http://laterlifefarming.rutgers.edu

Do Ask yourself....

• Do I have a will? • When did I last review it? • Have I sought professional help to guide me

through this process? • Can I find important documents such as wills,

titles to property, banking and investment records? Is it possible for others to find them as well?

• Have I planned for who will take over my farm when I can’t?




Do Reduce Production Risks By:

• Enterprise Diversification • Crop Insurance • New Technologies

Do Ask yourself....

• What crops or livestock will I produce? • How will I produce them? • What technology and equipment will I use? • What varieties or species will I produce? • Do I have any other farm related activities, such

as a booth at the farmers’ market, spraying for other farmers, selling agricultural chemicals, etc.

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Example Production Plan: Mrs. Greenjeans Greenhouse is a small nursery located in Anywhere, USA. We purchased the business last year. The previous owner produced only bedding plants. We want to develop year-round production and sell primarily to retail garden centers. We hope to increase production and sales over the next five years by using the existing space more efficiently. The existing headhouse is the staging area for planting and preparing plants for delivery. It also has storage capacity for containers, chemicals, fertilizers, and bags of growing media. The following table gives our production and price projections of each crop for the next five years. We plan to work closely with our county agent and use integrated pest management as much as possible.

Production and Price Projections for Mrs. Greenjeans Greenhouses

Items Price ($) Number of Units Produced Year 1 Year 2 Year 3 Year 4 Year 5

Bedding plants 6.65 8,000 9,000 10,000 11,500 15,000

Hanging baskets 7.00 2,500 3,000 3,000 3,000 3,000

Perennials 10.00 1,000 1,000 1,000 1,000 1,000

Poinsettias

4-inch 2.00 1,000 1,000 1,000 1,000 1,000 6-inch 4.00 2,100 2,100 2,100 2,100 2,100 7-inch 7.50 1,000 1,000 1,000 1,000 1,000 8-inch 12.00 400 400 400 400 400 10-inch 18.00 300 300 300 300 300

Hanging baskets 25.00 75 75 75 75 75

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Risk Management Plan

• Do Cover the 5 Main Sources of Risk – Production – Marketing – Financial – Legal – Human Resources

Do Ask yourself “Have I...” • Identified my farm risks? • Communicated these risks with other family

members and partners? • Looked at my goals in terms of the risks which

can keep me from attaining those goals? • Identified which risks I am comfortable

retaining/managing with my own resources? • Reviewed my health, life, and crop insurance?




Marketing Plan: Do Ask yourself... • What are the overall goals of your marketing strategy? • What condition is the industry/market in currently? • How does your business maximize income potential through

marketing? • What is your target market? • Who are your competitors? • What makes the business special? • Why would a customer prefer this business over that of a

neighbor? • http://aesop.rutgers.edu/~farmmgmt/marketing/tomarket.pdf

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http://aesop.rutgers.edu/%7Efarmmgmt/marketing/tomarket.pdf




Management Plan: Do Ask yourself...

• Who will run the enterprise? • What are their responsibilities and capabilities? Also

include information on key employees. • How many employees will I have for what functions

during which times of the year? • What are the qualifications for each position? • How many hours will they work and how much will they

be paid?

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Key to the Financial Plan

• Illustrate your ability to: – Repay your investor – And make a profit

• How do you do this?....

Don’t

• Project more than 5 years unless investor asks • 5+ years projections will likely be incorrect

Provide all Financial Documents

Income Statement

Balance Sheet

Cash Flow Statement

The Income Statement

Summarizes the earnings and expenses of a business for a given period of time.

Income Statement Example

Sales $100,000 - Direct Costs (Easily allocated to each crop or livestock) $65,000

- Overhead Costs (Occur no matter what) $25,000

Net Profit or Loss $10,000

The DIRTI 5

• Depreciation • Interest • Repairs • Taxes • Insurance

Balance Sheet Or Net Worth Statement

- Is A Financial Snapshot of Business On A Specific Date

Shows: • Assets - Valuables The Business Owns • Liabilities - Claims Of Outsiders • Net Worth - Claims Of Owners

Copyright ©, Rutgers, The State University of New Jersey, all rights reserved

Example Balance Sheet

Cash Flow Statement

• Breaks down income and expenses over a designated time period (monthly or quarterly)

• Alerts you to when you need to borrow $ or have a source of funding

Provide Monthly and Annual Data

• Use monthly data the first year • Annual data thereafter

Know Your Audience

• Don’t provide too many scenarios in your projections if your purpose is to borrow $ – Two scenarios are sufficient for the bank – Don’t drown your investor in paperwork – Just use best-case and break-even case

Know Your Audience

• If your audience is your own company – Include everyone’s ideas – Do a SWOT analysis of each

Make sure that all numbers reconcile • Assets = Liabilities + Equity

• Bankers always check the math!




Do…

Put the Executive Summary

first in the package but finalize

it after the whole package has

been assembled.

What is an Executive Summary?

• A stand-alone, exciting and descriptive piece that outlines the essence of your idea.

• A summary of your business idea and the conclusions you have made - while working through creating the business plan.

How Do I Start the Exec. Summary?

• Answer each of those questions in one or two sentences: 1. Who? 2. What? 3. When? 4. Where? 5. Why? 6. How? 7. How much?

Outline of an Executive Summary

Do include components of: • Mission Statement • Business Concept (your idea) • Measurable Goals and Objectives • Management - Management Needs and

Management History • Markets - Marketing Strategy • Finances - Financial Strategy

Example of Executive Summary Mrs. Greenjeans Greenhouse is a small greenhouse business located in a fairly rural area in Cape May, NJ. I, Mary Wilson, am the manager and owner of the greenhouse. This spring will be my first crop. My husband, John, earns enough money at his job as a financial advisor to keep the family going while I get the business up and running. He is helping with the business plans. Our two children, a daughter Linda, who is 14 and in 9th grade, and a son, Dan, who is 15 and in 10th grade, are helping out with the business a few hours after school each day. The greenhouse facility is 25,000 sq.ft. and is 30 years old. The business specializes in bedding plants and sells mostly to local retail garden centers. The previous owner of the business, Bill Smith, had reduced production to only bedding plants in the spring. I plan to produce bedding plants, but to also expand production to include poinsettias, hanging baskets, perennials, and garden mums so that I have crops almost year-round. This will improve cash flow, keep customers coming back for products all year, and help keep the same employees most of the year. I plan to produce my own plugs and rooted cuttings in the winter so that I can ensure the top quality demanded by the retail garden center market. In addition to bedding plants, I will produce perennials for spring sales to garden centers. In the summer and fall, I will grow my own poinsettia stock plants, and poinsettias. In addition to producing plants in the greenhouse, I will also produce garden mums for fall sales outdoors.

Don’t get frustrated and stop working!

Keep Going!

• This is the most important part of your plan. • This is one of the last steps to having a draft. • If you get overwhelmed, try underlining key

points of your business plan and organizing them on one sheet of paper.

• If you get stuck, ask someone you trust to review it.

Additional Resources • Annie’s Project NJ Website: http://aesop.rutgers.edu/~farmmgmt/anniesproject.html • Annie’s Project NJ Facebook Page : https://www.facebook.com/anniesprojectnj • University of Minnesota Ag Plan: https://www.agplan.umn.edu/ • Rutgers Later Life Farming: Retirement Planning

for Farm Families http://laterlifefarming.rutgers.edu/ • Rutgers “To Market to Market” Workbook:

http://aesop.rutgers.edu/~farmmgmt/marketing/tomarket.pdf

http://aesop.rutgers.edu/%7Efarmmgmt/anniesproject.html

https://www.facebook.com/anniesprojectnj


http://laterlifefarming.rutgers.edu/

http://aesop.rutgers.edu/%7Efarmmgmt/marketing/tomarket.pdf