Steps to build a strong business plan
A robust business plan provides a comprehensive view of your operation, from its foundational mission to its long-term financial strategy. While each plan should be tailored to the specific farm or ranch, most successful plans contain these essential elements:
1. Executive Summary: This is the concise overview of your entire plan. Written last, it should be compelling enough to make the reader want to learn more. It briefly touches on your mission, key goals, and financial highlights.
2. Company Description: Detail the history of your operation, your mission and vision for the future, and your legal structure (e.g., sole proprietorship, LLC, corporation). This section explains what you do and why you do it.
3. Operations Plan: This is the “how-to” section of your business. Describe your day-to-day activities, production cycles, and the resources you need. This includes land, buildings, equipment, labor, and key technology. Outline your production methods and how you ensure efficiency and quality.
4. Marketing Plan: How will you sell what you produce? Identify your target markets, whether they are local sale barns, direct-to-consumer channels, or large processors. Detail your pricing strategy, how you will get your products to market, and what makes your products stand out from the competition.
5. Risk Management Strategy: Acknowledge the inherent risks in agriculture. Identify potential challenges related to weather, disease, market price volatility, and regulatory changes. Most importantly, outline the specific strategies you will use to mitigate these risks, such as crop insurance, diversification, or hedging.
6. Financial Plan: This is the quantitative heart of your plan. It should include historical financial data (if available) and detailed forward-looking projections for at least three to five years. Essential components include:
• Balance Sheet: A snapshot of your assets, liabilities, and equity.
• Income Statement (P&L): Shows your revenues, expenses, and profitability over time.
• Cash Flow Statement: Tracks the movement of cash in and out of the business, which is critical for managing liquidity.
• Capital Expenditure Budget: Outlines planned investments in major assets.
7. Succession Plan: For family operations, this section is crucial. It outlines the strategy for transitioning ownership, leadership, and operational responsibilities to the next generation, ensuring the long-term legacy of the farm or ranch.
You don’t have to create your business plan alone. Reach out to MU Extension or the Missouri Small Business Development Center (SBDC) and ask about their business advising services and how they can assist in developing a farm business plan.
Geoff Bowsher is the Vice President, Ag & Rural Lending of FCS Financial in Springfield, Mo.
