Plan for and communicate success

  Understand the purposes of a business plan.  Be able to develop a business plan  Communicate business plan to a commercial lender  Utilize a business plan to set your farming operation up for success Objectives

 A business plan is a decision making tool that takes the form of a formal document. It encompasses many of the concepts we have already talked about:  Mission Statement & Farm Story  SMART Goals (short and long-term)  SWOT Analysis  Organizational Structure/Job Description/Job Specification  Balance Sheet (actual and/or projected)  Income Statement (actual and/or projected)  Enterprise/Whole-Farm/Cash Flow Budgets  Break-evens What is a Business Plan?

  Action Plan – starting a business can seem like a daunting task. A business plan breaks starting a business into smaller problems that are easier to solve. This makes the process more successful.  Road Map – a business plan gives your business direction. This will cause it to have a higher likelihood of success and help you communicate your vision to investors and commercial lender.  Sales Tool – a well developed business plan will help you sell your business venture idea to yourself, family members, investors, and commercial lenders. It will show the feasibility of an idea. Primary Purpose

 Creating Your Business Plan

  An executive summary is a stand-alone summary of your business plan. It is a chance to sell your reader on your business.  Summarize the essence of your business  Describe why this is a good opportunity  Describe the product, describe the target market and your product’s benefits  Describe your marketing plan, competitive advantage, management team, financial strategy, and funding strategy  Most people will not read pass the executive summary, so make it count! Executive Summary

  Identify what kind of business you want to pursue. What will you grow/make? Who will be your customers? Where is your location? How will you sell your product? Where do you envision this business to be in 5, 10, 20, or 25 years?  Write Introduction  Develop your mission statement  Develop your farm story (from start to now)  Set SMART goals  Develop objectives  Develop an exit strategy Step 1: Company Overview

  This is your opportunity to introduce the reader to your product.  Describe your product’s feature – attributes, demand for product, prices, customer service  Describe your product’s benefits – what are the benefits for your target market?  Where is your product in the stage of development? When will it be ready for market? What obstacles stand in your way?  Describe your product in ways that someone who has never heard of your product will understand. Step 2: Product Overview

  This should be an in-depth analysis of your market.  Define your market, the size, identify any growth  Identify trends affecting your market i.e. consumer trends, business trends, political trends. List both good and bad.  Identify your target market. Look at demographics, economic value, how buying decisions are made. Your target market may be a consumer segment or a business segment. Step 3: Market and Industry Analysis

  This should be an in-depth analysis of your industry.  Define how products get to the consumer. What is the level of integration? This should be a supply chain analysis.  Analysis of the competitive market including:  How do businesses compete i.e. price, quality, customer service?  Is it a highly competitive market?  How do competitors react to new, entering firms? Can your business withstand this reaction?  Are there barriers to entry like economies to scale, establishment cost, agreements with suppliers, customers, strategic partners?  Analysis of each competitor and any opportunities you see. Step 3: Market and Industry Analysis Cont’d

  This section can make or break you. You need to show that you can be competitive.  Provide a complete profile of your direct customer  Describe the marketing channel to get your product to the final consumer  Describe your market positioning. What does the customer need to believe about your product? What unmet need are you fulfilling? What makes you different? Step 4: Marketing Plan

  Describe how your product has been tailored to meet the needs of customers  Describe your pricing strategy and how it will be effective  How will you communicate with your customer? Do you need branding?  This may be a great place to show forecasted sales and revenues Step 4: Marketing Plan Cont’d

  You and your employees will be spending a majority of your time and money on operations. It’s important to tie this into your marketing plan.  Describe how you will produce and deliver your product to the direct consumer  Scope of Operations: what tasks will be completed “in-house”  Identify key vendors, suppliers, lenders, strategic partners. What arrangements have you reached with them?  How many inputs, employees, and capital assets do you need to reach your five year sales goal? What level of production do you need? Step 5: Operations Plan

  Describe what 5-10 events need to take place in order for your business to succeed in the next 2-3 years.  Funding  Key agreements  Strategic alliances  Key hires  Facility development  Marketing Strategy Step 6: Development Strategy

  The idea is to convince the reader that you have a great management team to support your great idea. Display your strengths while downplaying your weaknesses. Note your accomplishments.  Include an organizational structure  If you have a board of directors, identify the members and their role  If you have a board of advisors, identify the members and their role  Define the ownership structure of the business.  Write a brief description of each management member including duties, skills, and responsibilities Step 7: Management Strategy

  Perhaps one of the most difficult parts of a business plan, this section addresses your true competitive advantages and how you will sustain your competitive advantage as more competitors enter your market.  To identify your sustainable competitive advantage:  Refer to your SWOT analysis  Identify your business’s resources including financial, physical, human, patents, trade-secrets, and organizational  Identify your business’s capabilities including management, sales, technology, or production expertise  Identify the barriers to entry that you can establish for competing businesses Step 8: Competitive Advantage

  You will want to include financial statement projections for your first five years of operation.  Income Statement – Annually for years 1-5  Balance Sheet – Annually for years 1-5  Cash Flow – Monthly for years 1-2, Quarterly for years 3-5  Break-even and sensitivity analysis  Include your key financial assumptions, compare your estimates to other companies in your industry, and identify the risks to implementation. Step 9: Financial Plan

  You will need to address how much funding is needed, the sources of funding, and how the funding will be used.  Funding Requirements – use your cash flow to determine how much funding is needed  Sources of funding – include equity (owner financing) and debt financing. How will funding from each of these sources be used?  Offering – this is your pitch for money  Equity financing – security offered, share of company, and ROI  Debt financing – collateral, term of loan, interest rate, and how it will be repaid Step 10: Funding

 Make Your Business Plan S TAND O UT

  Professional:  Choose professional looking fonts, colors, pictures, and format  Include a cover letter  Include an executive summary  Include a table of contents and topic headers  Include appendices, figures, charts, and graphs  Proof-read, spell-check, and grammar check your work Make Your Business Plan…

  Informative:  Write clearly – “say what you are going to say, say it, say what you said”  Write succinctly  Cite your sources  Reference your appendices, figures, charts, and graphs where applicable in your business plan Make Your Business Plan…

  “Writing a Successful Business Plan” by Lawrence and Moyes “Writing a Successful Business Plan”  Small Farm Funding Resources from USDA National Agricultural Library Small Farm Funding Resources  Starting a Business from The U.S. Small Business Administration Starting a Business  Farm Business Planning from Beginning Farmers Farm Business Planning Business Plan Templates:  Business Plan Preparation from University of Colorado Business Plan Preparation Resources to get you started

 Homework  Gather information for your business plan.  Write a rough draft of your business plan. Make sure to include a cover letter, executive summary, and all 10 steps.

  Take a minute to write down one or two ideas or takeaways from this lesson. One Minute Takeaway

 Sieverkropp Consulting LLC. Contact: Elizabeth Sieverkropp (509) Website: Training Program Homepage: program-homepage