Create a Farm Business Plan
A Farm Business Plan can be a key factor in the success of your farm, and it is a great way to introduce yourself to potential investors and landowners. Even if you have already secured land for the season, creating a Business Plan will help you be prepared by setting expectations and goals, understanding your financial situation, managing risk, and developing a marketing strategy.
When you present your Business Plan to a potential investor or landowner, be sure to include your name, farm name, contact information, and date.
You will write this part LAST, to summarize the overall plan. Introduce yourself, your farm, what you plan to do, how much money you need, and how much money you expect to make. This is one of the most important pieces of your business plan and it, together with the financials, may be the only parts of your plan a potential investor will read; it’s critical that this is written carefully.
Farm Business Overview (Who’s On Your Team and Why They’re There)
- Farm history
- Your experience and education
- Current workforce, including projected needs or changes
- Operating plan (the day-to-day): Will you be farming full-time? What off-farm jobs might you or your partner(s) have? What will your farm work week generally look like?
- Goals – short- and long-term (5 to 10 years).
Values and Mission Statement
Concisely state why your farm business exists. Try writing from your customer’s point of view, and keep it to as few words as possible. If you’re not sure what to write here, try this exercise:
- Fill in the following blanks: “Within the next _____years, grow __________(farm name) into a $______(annual sales) farm business providing _____________(description of products and/or services) to ______________(describe your customers)”
- Rewrite this vision statement three times: (1) using your own words, (2) with crazy, optimistic, and then (3) to capture exactly what you want to say.
- Type of Business Entity (sole proprietorship, general partnership, LLC, LP, etc.)
- Land Base – list each parcel, total acres, location, owned or leased (attach lease agreements & descr ibe lease terms)
- Number of acres cropped (irrigated and dry-land)
- Crops to be grown on each parcel, number of acres for each crop, past yield and expected yield, estimated price per unit, total income per parcel
- List total number by classification (cows, bulls, heifers, etc.), whether they’re owned or leased, number of head to be produced, pounds per head for sale, estimated price per pound.
- Conservation practices
- Equipment needed and source (own, lease, family, custom hire, etc.)
- Future land needs, if applicable (include any plans to purchase or lease additional land)
Products and Services
What you’re growing and selling (specific crops, value-added products, agritourism, etc.)
- Market analysis and competitive overview (explain who and what you’re competing against and how you fit into your particular niche)
- Sales plan (where will you sell and how — be specific!)
- Long-range marketing plan
- Planned changes in marketing practices
- Liability – amount and kind (general, product, etc.)
- Life – amount, kind, who is covered
- Health – type, name of plan, coverage
- Crop – what kind (hail, multi-peril, etc.) amount of coverage, cost, agent, and company
Expansion Plans (if any)
- Plans to purchase or lease additional real estate
- Proposed source of capital and all repayment plans
- Equipment purchases – date, item, cost and type of financing
Describe the risks your business faces, as well as your plan for overcoming those risks.
Financial Information and Needs
- Complete set of income and expense records (“Profit or Loss Statement”) for current year and past three years. Don’t forget to include non-farm income streams!
- Balance sheet/statement of net worth (where your business is right now; includes all assets, liabilities, and owner’s equity)
- Cash flow budget for next 1 to 3 years. Assemble into monthly spreadsheets.
- Credit requirements
- Projected financial needs, including personal living expenses
- Note: It can be useful to forecast three different financial scenarios: optimistic, realistic, and worst-case. If the numbers don’t work out for the worst-case scenario (i.e., if you don’t have a plan for how to deal with it), an investor may not be interested.