© 2009 Delmar, Cengage Learning Chapter 5 Planning and Organizing an Agribusiness

© 2009 Delmar, Cengage Learning Essential Questions What are the benefits and challenges of entrepreneurship? What is a business plan? What makes for a successful agribusiness?

© 2009 Delmar, Cengage Learning The Small Business Defined by the SBA (Small Business Administration) as a business that is independently operated, is not dominant in its field, and meets certain size standards in terms of number of employees and annual receipts. Ninety percent of the nation’s new jobs in the private sector are in small business. Accounts for more than 40% of GDP. The number of women and minorities opening small businesses has grown significantly since the 1960s.

© 2009 Delmar, Cengage Learning Entrepreneurship: General Characteristics Entrepreneurship: All the risks pertaining to forming and operating a small business. Reasons people choose it: –Work for themselves –Set their own hours –Test their own theories –Set prices, determine production levels, control inventory –Solve problems –Set company policy

© 2009 Delmar, Cengage Learning Personal Characteristics of Entrepreneurs An entrepreneur should first have knowledge or skill in the area he/she wants to start a business, but he/she must also be the following: –Independent, self-confident, energetic, organized, visionary, persistent, optimistic, committed, problem solver, self-nurturing, risk taker, action oriented, flexible, emotionally stable, and have a sense of urgency

© 2009 Delmar, Cengage Learning Challenges of Entrepreneurship Total Responsibility: –Must manage workers, manufacturing, and shipping –Must find customers, sell the product, and be certain orders are met Long, Irregular Hours –Longer hours than working for someone else –Often over 60 hours/week Financial Risks –Take money to start a business, run a business, and grow a business –Only half of all small businesses reach a fourth year

© 2009 Delmar, Cengage Learning Reasons Agribusinesses Fail Failure is usually the result of three factors: –Management (a mismanagement of resources, people, or products, by failure to fully plan) –Labor (unqualified and/or undependable workers can cause failure of any business) –Finances (inability to allocate resources, debt, and taxes can all cause an agribusiness to fail)

© 2009 Delmar, Cengage Learning Analyzing an Agribusiness Venture Prior to starting a business, one must first recognize a need, then take into account several factors: –What financial resources are needed; what labor will be required; what management requirements exist; does a market exist for this service or product; where should the business be located; should an agribusiness be started or purchased?

© 2009 Delmar, Cengage Learning The Business Plan Prior to the actual agribusiness, an entrepreneur must create a business plan. A business plan is a written description of a new business that describes all aspects of the proposed agribusiness. This plan allows the entrepreneur to be realistic, honest, detailed, and objective. It also serves as a formal document when seeking credit from various financial institutions.

© 2009 Delmar, Cengage Learning Preparing the Business Plan A business plan includes six major sections: –Introduction: Statement of purpose/objectives –Table of contents –The organizational plan (see slide 11) –The marketing plan (see slide 12) –Financial documents (see slide 13) –Appendix: Support material for any of the previous sections (resume, credit report, etc.)

© 2009 Delmar, Cengage Learning The Organizational Plan Includes two major areas: –Summary of the agribusiness Mission; business model; strategy; strategic relationships; analysis of strengths, weaknesses, opportunities, and threats –Detailed description of administration Products or services, intellectual property (copyrights, patents, etc.), location, legal structure, management, personnel, accounting, legal, insurance, security

© 2009 Delmar, Cengage Learning The Management Plan Sets out all the elements of components of the marketing strategy. This plan will provide the following: –Overview of goals, market analysis, marketing strategy, implementation of marketing strategies, customer service, assessment of marketing effectiveness It is important to first understand the current market trends (what works, what doesn’t) and the state of the economy before writing this plan.

© 2009 Delmar, Cengage Learning Financial Documents This portion of the overall business plan will address the quantitative interpretation of everything set out in the organizational and marketing sections. In other words, what’s everything going to cost and what monies are currently available? This will include the following: –Summary of financial needs –Loan fund dispersal statement –Pro forma cash flow statement (budget) –Three-year income projection –Projected balance sheet –Break-even analysis

© 2009 Delmar, Cengage Learning Major Areas of Agribusiness Management The ability to manage is probably the single most important quality for the entrepreneur. Management must take place in several areas: –Planning (what, when, where, how) –Organizing (grouping together activities, people, and resources) –Directing (leading by instruction and guidance) –Staffing (recruitment, selection, training, and retention) –Controlling (setting standards, solving problems, monitoring, communicating)

© 2009 Delmar, Cengage Learning Goal Setting for the Agribusiness Goals should be set prior to and during business operations. These goals can take three forms: –Immediate, short-term, and long-term Immediate goals are accomplished daily, weekly, or monthly. Short-term goals are set for accomplishment in a year or two and often lead toward long-term goals. Long-term goals are set with the future of the business in mind.