Planning your farm business

Business planning. If those two words make you nervous or you’ve been overwhelmed in trying to write your own business plan, use this guide to help you find a starting point. A plan is simply a roadmap. And like any journey, farming is better when you have a road map. By the end of this guide, you will have a basic draft outline of a business plan that you can use as your farming journey roadmap. When you stick to your own business plan, you will be able make decisions you can be confident in. So let’s get started.


Dreams come a size too big so we can grow into them

Your vision, your dream

Your vision is your big dream, the life you want more than anything. You want to dream big, The only stipulation I would suggest is that you make your vision realistically possible. For example, it would be quite difficult for you to have a rice paddy farm in the Yukon. It would also be unlikely that you can own and milk 1000 cows within the current dairy system in Canada. Take some time to sit in peace and quiet and dream of what farm you want and what your life will look like in this vision.

Write your entire vision and dream on paper. Take the following into consideration:

How many acres do you have access to?
What kind of crops grow in your climate?
What is your target market?
Will you have other careers/jobs away from farming?
What kind of livestock are you comfortable working with?
What would a typical day look like for you?

Having a vision and passion will help guide you when you set goals to build your dream. It’s the fuel for entrepreneurs and farmers are entrepreneurs. Having a vision will get you out of bed at -30C and will help you pick yourself back up when you lose a significant number of animals. Conventional business plans will recommend having a mission and a very specific type of vision. I’m asking you to day-dream and visualize your farm life dream. We can worry about your mission and vision statement later.

The concept of reverse engineering applies nearly everywhere. It means starting with the end result and work backwards to determine the steps. Since no two farms are identical, the starting point is going to change based on your dreams. Take your answers from your dream vision and work through the following exercise: 


Breakdown the resources needed for your 5 year goal. Include infrastructure, amount of feed, land base for that feed, etc. What do you need to accomplish this goal? If it is no longer working off the farm, how much income does the farm need to provide to replace your off-farm income? This step may take some research. If someone near you has accomplished your goal, speak to them to find out how they did it and what kind of resources they used to get there. If you come across any cost estimates, keep track of those.

Next, work through this list of questions to determine the steps you need to take to get to your goal based on the information that you gathered in step 2. Do not get bogged down on the details at this point. Goals are a moving target and the key part of this exercise is less about the timeline and more about determining your wants and needs.


Reverse engineer your goals

Step 1

What is your 5 year goal to fit in with your vision? During the harvest, 5 years from now, what do you want to have accomplished? Make sure this goal is feasible. Example, owning 1000 acres is likely not feasible on a 5 year timeline. Feasible can include increased rental land base, paid down a portion of debt, no longer working off the farm, doubling your herd, etc. Outline all of your goals. A text document is most recommended because it means you can flesh out your goals better. I am starting with a 5 year goal because 10 and 20 year goals are often too far in advance if you are new to the process of reverse engineering goals.

Step 2

What needs to be accomplished the year before your goal to feel like you’re going to make it?
What are the major milestones you have to take to get to your goal?
What do you have to do today to be one step closer to your goal? 

Now armed with your detailed goals list, this is going to form the basis of your business plan. It will probably change dozens of times, you will make all kinds of revisions but it will be the base of your plan. All goals take time to accomplish. You can use this process over and over again.

The purpose behind goals is to provide you with a focus for your business plan and help you get one step closer to your vision. If your goal can not have methods and practices to assist with it, then it is merely a task. I want to help you build your goals into your daily work so that they can be accomplished one small step at a time.

Step 3

Rome was not built in a day

Once you have your goals and a bit of a schedule for how you can accomplish the goals, its time to turn them into a business plan. Click through below to get an idea of what each section should hold.

Turning Goals into a Business Plan

Executive Summary & Introduction Items

Ironically, you should probably write this portion last. The executive summary is simply a summary of your business plan in a single paragraph or about 200 words. This is your pitch, your presentation. What does the reader of your plan have to know about you and your goals? If the reader does not read anything else, will they understand your goals?

Make sure you include a table of contents, a list of any enclosures (additional documents requested) and the date that the plan was last reviewed.

In this section you are going to document a full description of the business. It should include:

Brief description of the business and opportunity
Location and physical description of the farm
Description of any infrastructure currently available
Legal structure of the business (sole proprietorship, partnership, corporation)
Licensing requirements
Key suppliers of services
Key milestones achieved to date
Management team bios (what skills do you bring to the farm and who is responsible for what activities)
Registration information for sales taxes, livestock premise IDs, farm business number

In addition to the description, also include what the objective of your farm is and what you plan to achieve. You can use your vision and goals from earlier to draft your objectives. If submitting a business plan, this is where you would put your mission and vision statements.

Business Description & Objectives

This is the place for all of your market research. Farming is so diverse that it would be impossible to know everything about every sector. You should use this section to educate the reader on:

Historical and current market size
Key drivers and challenges of your market
Any trends you found in your research
Major players in the market
Nature of competition
Market outlook
Important regulations in the market such as supply management

Finish this section by explaining what will make your business stand out in this market and what your unique value proposition of the business is versus major competitors.

Market Overview

Start this section off by talking about potential risks your farm business faces. One way to do this is to do a SWOT analysis. SWOT works like this:

Strengths - things that your farm is good at and will make you stand out.
Weaknesses - issues within your business that could hurt your sales
Opportunities - factors outside of your business that are a chance for growth
Threats - major risks faced by the entire farming sector you are involved in (political, climate, regulative) 

Once you have risks identified, explain what your risk mitigation strategies will be for each major risk and for the ones that are within your control. You may also want to highlight your keys to success as to what will help you overcome any major obstacles.

Risk Assessment & Mitigation

Here you will explain in detail what your marketing plan is and how you will execute it. You should consider the following:

- Current stage of business development: What stage of production is your farm in and how will your marketing be impacted? For example, if you are starting out small and doing direct marketing, what will happen when your production triples?

- Proposed timeline of production: At what stage will you produce what? Do you have seasonality for your products?

- What is your target market? Who is your ideal customer? What is your relationship with key buyers? Will you be participating in contracts?

- If you are doing direct marketing, explain what your advertising and promotions are going to look like. Explain how you will determine your pricing.

- Make sure you consider distribution regardless of your marketing model. How will you get your products to buyers? Do you need to hire someone to move your product?


Marketing Plan

When you get to your operations plan, take the seasons into consideration. Using the same concepts from reverse engineering your goals list, work backwards through each season. What do you need to do in the spring? Summer? Fall? 

This is also where you will present your expansion plans. If you plan to acquire more land or build a new barn, this is where you want to outline those plans. It's best to stick to three to 5 years in detail with longer term goals briefly mentioned. That goals list we did above, remember that? This is where it goes.

If you are part of a team, you will also want to state who is responsible for what in the day to day running of your farm.

Operations Plan

The financials are best done on a spreadsheet. Excel is an amazing tool you should try to become comfortable with. When forecasting, using budget templates is a great starting point. You will need:

3 year forecast income statement
3 year forecast balance sheet (typically only for corporations, larger active farm businesses)
3 year forecast cash flow statement (most important)

Check with your bank regarding how many years of forecast statements they want. When you are setting up for forecast financials, the easiest is to use your current year's financial statement as a starting point. Increase the costs and revenues as you expect them to happen. If you are doing this for the first time, make sure you highlight any assumptions that you are making. 

Financial Forecasts

Depending on what stage of your business plan you are in, you might also need to include a few other items. If you plan to present the plan to a bank, consider adding:

Start up plan: Include your start up costs, financing requirements and how much funding you personally have available.

Resumes: I have been asked for a resume nearly every time I submitted a business plan.

Tax Returns: Banks and other financial institutions will probably ask for your tax returns from prior years. Make sure you have these done and filed on time.

Extras

The best thing to do is to have this in a word document so you can update it all the time. Business plans are not meant to be static, they should be updated and changed regularly. Like a road map, you never know what turns you might find. The business plan should go with you as you grown and reach your goals. It does not have to be pretty, it does not have to be fancy but you do need one. You would not go camping without a map, you should not start a farm without one. So what are you waiting for? Grab your laptop or even a pen and some paper and put your dream on paper! If you struggle with getting a plan ready for the presentation, check out the Work with Me tab for assistance.

Final Tips

build your farming dream

For Canadian Farmers • By A Canadian Farmer

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