1. BUSINESS PLANNING FOR BETTER RISK MANAGEMENT 2013 Extension Risk Management Education National Conference Winifred W. McGee, Senior Extension Educator Lynn F. Kime, Senior Extension Associate

2. Why Proactive Farm Management? Farmers need to look “down the road” Existence of an expanded marketplace – Contracts – Direct marketing – Global competition More technology/complexity in production Increasing impact of regulations Economic roller coasters

3. Roles of Farm Business Planning Putting thoughts in writing Defines goals and objectives Defines values and mission Organizes the research needed Shares the vision with others – Family/partners – Advisors – Lender

4. Research Data on Written Plans 90% of lenders require a written business plan to make a loan. Farmers and business plans – <20% have written plans – ¼ of those having plans don’t use them Business plans are essential if you are – Seeking to improve profits and efficiency – attempting to secure financing or equity capital Source: Business Planning Blues Part I, Dr. David M. Kohl. Business and Economy Trends. Ag Choice Farm Credit Website. February 18, 2011.

5. Many Uses for a Plan Strategic Planning Marketing Expansion Contingency Planning Obtain Financing

6. Plans for Starting to Farm Establishment of a traditional, or alternative agricultural venture Identification of – management tasks – financing options Ensure that daily actions are compatible with long-term personal, environmental, economic, and community values

7. By looking ahead, pre-venture, Address all five areas of risk: Market – Level of demand/marketing venues Financial – Investment needed/potential ROA Production – Skills/equipment/variables Human Resource – Involve family/partners Legal – Licenses & permits/regulations Visualize before action!

8. Not Just for Start-ups! Experienced producers use written plans to make decisions in a better-informed way: – add value to the existing operation through product processing-- cooperative marketing direct sales – explore market options – map out a transition on the farm – incorporate more family members/partners – transfer or sell the business

9. Plans for Existing Farms Address all five areas of risk: Market – Direct Sales/Consumer Expectations Financial – Pro forma Budgets/Insurance Production – Visualize processes/products Human Resource – Involve family/advisors Legal – Licenses & permits/environmental and food safety regulations Retrofitting and enhancing for profitability/ sustainability!

10. Educational Opportunities Seven Penn State Extension Workshops support agricultural entrepreneurship: – Exploring the Small Farm Dream – Your Future in Focus – Annie’s Project – Food for Profit – Managing Risk for Food Businesses – Farm Sense – Farm Transitions

11. Objectives of Your Future in Focus To challenge participants to farm proactively To draft a written business plan To establish communication/ networks – Professional service and support – Family & partners – Other owners

12. Your Future in Focus Business planning, step-by-step – Defining the business mission/vision/values – Setting goals and objectives – Research, resources and tools – Business strategies – Marketing/promotion – Financial management – Financing options – Implementing and updating the plan

13. Your Future in Focus Features Peer-reviewed text – Step-by-step plan development – “Case study families” – Real-life sample sections In-class applications – Guest speakers – Worksheets – Tie to UMN AgPlan on-line tool

14. Pilot Sessions for the Curriculum Lancaster – 9 evenings (Jan – Mar 2009) 9 participants Montrose -- 5 days (Jan – Mar 2009) 7 participants Gettysburg – 5 days (Jan – Mar 2010) 5 participants

15. Pilot Project Impacts 17 of 21 participants completed post-survey Carry out an entrepreneurial self-assessment – 15 had done so – 1 “not yet” – 1 N/A (decided not to go into business) Written mission statement – 15 crafted a business mission description – 10 of the 15 had used the mission statement to define their enterprise goals and objectives

18. Business Planning Steps Reported Identifying target market – 8 asserted demographics were robust – 2 intended to do the research – 6 not sure about demographics Identifying applicable regulations – 9 (53%) learned about appropriate rules/standards from class guest speakers

22. Long-term Impact – Success Stories Second generation integration – Strack’s Tree Farm New enterprise development – Ladys’ Center Mills Farm, LLC Reinventing a farm – Lindenhof Farm, LLC Mentoring business plan development – Patches Family Creamery

23. Stracks Tree Farm

24. Ladys’ Center Mills Farm, LLC

25. Lindenhof Farm, LLC

26. Patches Family Creamery

27. Building an Enterprise Plan Time investment Written down Networking with others Think things through PLAN FOR SUCCESS