Session 24: Preparing a Farm Business Plan for Next Season Gomer G. Tumbali Project Team Leader, TCP/PHI/3402

Session Objectives At the end of the session,  discussed the usefulness of farm business plans; and  formulated farm business plans for the coming season.

Step 1:Plenary Discussion Elicit the following conclusions:  Every farm should have a written business plan. A farm business plan records all the important decisions about the farm.  Writing a farm business plan will improve thinking, decisions, communication and memory.  A farm business plan helps evaluate the success of the farm at the end of the season. If the actual results do not occur as planned, the written record should help the farmer to evaluate what went wrong, whether better decisions could have been made. Without a written record, incorrect memories may cause incorrect changes.

Step 1:Plenary Discussion  A farm business plan is very important for the creation or expansion of a business that processes products. Many new business ventures fail because they do not focus their efforts on properly implementing the plan.  The business plan is not something you complete and then forget about. It is a living document that will undergo change as you move through the business development and implementation process.  Focus on the quality of your business plan, not its length. A simple, clear plan is best.

Step 2: Recall format of farm business plan (Session 11)  Background  Farm production plan  Market plan  Profitability  Cash flow and cash availability  Risks and risk management  Notes

Farm Business Plan Outline Farm Enterprises: ______________ Date: _____ 1.Background of your enterprises: _____________ 2.Name of Farmer Entrepreneur: _______________ 3. Address: _____________________ 4. Period of the Plan: _______________________ VISION: GOAL: 1.Farm Production Plan 2.Market Plan 3.Financial Plan 4.Risk & Risk Management Plan

Objectives Objectives: By the end of the session, the participants shall have: 1. Identified a viable farm enterprise; 2. Assessed the technical feasibility and availability of other resource required; and 3. Formulated the individual farm business plan What is a farm business plan?What is a farm business plan? farm business plan A farm business plan is a document that records the most important decisions and actions affecting the operation of the farm business. It is a way that make sure that all the things that need to be done, and in a way that makes the farm more profitable.

1. Background: 1. Background: It is the description of farm business including the vision, goal and objectives. It guides farmers stay focused on what he or she wants to achieve. 2. Farm Production Plan: 2. Farm Production Plan: State what crop you will grow and number of hectares and/or square meters you will plant. Components of Farm Business Plan

EnterpriseFarmland Size (ha /sq.m. Expected Yield/ha or unit Total Yield (ton/kg/bag) Enterprise 1 Enterprise 2 Enterprise 3 Production Plan

1. What price will you get for your product if you sold it at your farm gate? 2. What price will you get for your product if you deliver it in the market 3. What costs will you have to take your product to the market. Market Plan - It specifies the enterprise, the target market and buyer in addition to the questions below.

EnterpriseTarget Marke t BuyerExpecte d volume to sell Farm gate price Delivere d Market Price Marketing Cost 1 2 Market Plan

Three Questions to be answered as inputs to financial plan.

ITEMQUANTITY UNIT PRICE/kg VALUE (PhP) Corn 1,600 kg P , Variable Costs Seed 50 kg , Fertilizer 1 bag Fertilizer (2) 1 bag 3,5003, Irrigation fees 10 hrs , Labor charges 8 hrs , Harvesting , TVC15, Enterprise Profit 20,900.00

ITEMPurchase Price/Unit Date of Purch ase Life Span Dep’n Cost Total Cost for the enterpri se Fixed Cost

4.1 Cash Flow  It details the cash flow (in/out) for each enterprise, each month to ensure that enough cash is available to the business.  It details the cash flow (in/out) for each enterprise, each month to ensure that enough cash is available to the business.  Liquidity is the ability of the farmers to generate enough cash to meet financial obligations as they come due without disrupting the normal operation of the farm.

ActivitySepSep OctNovDecJanFebFeb Ma r AprApr MayJunJulAu g Total Inflow Sales5,900 Cash Availabl e 5,900 Outflow Seed500 Fertilizer500 Pesticid e 200 Hired labor Cash Needed Net Cash Flow (900)(2800 ) (3000)(354 0) (4440 ) 1460 C ash Flow

4.2. Profitability  It details the profit contribution from each enterprise, and deduct fixed costs to arrive at whole farm net profit.

Expected enterprise profit(P) (A)Total Enterprise Profit Fixed Costs (B)Total annual Fixed Costs Whole Farm Profit (A-B) Profitability

Risk & Risk Management Risk is defined as the probable occurrence of an event, which can be calculated with some accuracy. It can be determined by identifying all the possible outcomes of a given situation. However, it is impossible to predict what we really happen. This unknown factor is risk.

The most common sources of risks are:  production and technical risk  marketing or price risk  financial risk  institutional risk  human or personal risk

RisksMitigate Risks RISK MANAGEMENT

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