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Helping Your Small Farmers Develop a Business Plan
Allen F. WysockiFood and Resource Economics
Small Farms In-Service TrainingMay 18, 2006
Helping Small Farmers Develop a Business Plan2
An Excellent Resource
http://www.sare.org/publications/business.htm
Helping Small Farmers Develop a Business Plan3
Building A Sustainable Business Guide
Excellent resource
Uses a whole-farm approach
Traditional business planning & marketing
Personal, economic, environmental, & community values included
Helping Small Farmers Develop a Business Plan4
Why Create a Business Plan?
Make regular marketing, operational, human resource, & finance decisions (pg 15)
To identify new market opportunities
Pursue long-term personal, economic, environmental & community goals
To communicate ideas to lenders, business partners and business stakeholders
Helping Small Farmers Develop a Business Plan5
Effective Business Plans Demonstrate
Alternative strategies are well researched
Production methods understood
Marketing aspects have been considered
Financial risks have been calculated
Helping Small Farmers Develop a Business Plan6
Business Plan Structure
Five critical planning tasks (pg 12)
1.
2.
3.
4.
5.
Identifying stakeholder values
Your current situation
Vision, mission, & goals
Strategic planning & evaluation
Presenting, implementing, & monitoring
Helping Small Farmers Develop a Business Plan7
Business Plan Structure
Four key management areas (pg 12)
1.
2.
3.
4.
Marketing
Operations
Human Resources
Finance
Helping Small Farmers Develop a Business Plan8
What Is Business Planning?
An on-going, problem-solving process That can identify business challenges &
opportunities That apply the 4 key management areas to
develop strategic objectives To move the business toward a vision (pg 15)
Who benefits from business planning? (pg 13)
Does one size fit all?
Helping Small Farmers Develop a Business Plan9
Planning Task 1: Identifying Stakeholder Values
The decision maker’s values provide the backdrop for their decision-making & management choices (pg 20)
Value identification is especially important if Values need to be shared among team
members (pg 22)
Your clientele need to share their values with other stakeholders in this process
planning collectively
Helping Small Farmers Develop a Business Plan10
Planning Task 2: The Current Situation
Buy-in requires a comprehensive, realistic assessment of the current situation (pg 27)
Brief history of the business (pg 28)
Identify important successes & failures What are the key opportunities & challenges? What have they learned from their experiences? How have values shaped the choices made?
Helping Small Farmers Develop a Business Plan11
Assessing the Current Situation
Conduct a SWOT analysis for each management area (pg 30)
= What the organization does well
= What is done poorly = External events, that if
taken advantage of could, improve the organization
= External events, that if not addressed, could harm the organization
SWOT needs to be an inclusive process
Strengths
Weaknesses
Opportunities
Threats
Helping Small Farmers Develop a Business Plan12
Assessing the Marketing Situation
Product: What is their product? (pg 30)
Customers:
: How are they different from everyone else?
What markets do they serve?
Unique features
Helping Small Farmers Develop a Business Plan13
Product Focus May Be The Wrong Question
Too many small businesses have a “production” mentality
CMSQ:
Products can be (pg 32): Commodities Final consumer goods & services
Why should anyone buy their products?
Helping Small Farmers Develop a Business Plan14
How Are Products Distributed?
Do they sell to: (pg
34)
to end-users
(individuals or organizations)
Distribution choices are important Impact unique characteristics of the product Commodity - relatively easy, least control Direct – most control & can be expensive
First handlers/processorsGrocery wholesales or retailersDirect Marketing
Helping Small Farmers Develop a Business Plan15
How Are Their Products Priced?
Do they have a choice? (pg 36)
Encourage them not to
Study current pricing conditions Typical price Price ranges Price leader Sensitivity of price to demand changes
“Sell Price”
Helping Small Farmers Develop a Business Plan16
How Do They Promote Their Product?
Promotional strategies affected by choice of distribution system (pg 37)
Assess promotional strategy effectiveness How many customers are reached? The cost of reaching customers
Push vs. Pull promotion
Helping Small Farmers Develop a Business Plan17
Assessing The Operations Situation
Resources: Physical resources available?
Production: What systems are they using?
: What systems are in place to support their business? (pg 38)
Institutional Considerations e.g., ISO 9000, HACCP, COOL, etc.
Management
Helping Small Farmers Develop a Business Plan18
Assessing The Human Resources Situation
Current Work Force: Who is involved & what roles do they play? (pg 46)
Skills: What are the unique HR skill? What skills are lacking?
Change: Will the labor situation change in the near future?
Helping Small Farmers Develop a Business Plan19
Assessing The Financial Situation
Financial Needs: Current living expenses Financial Performance: What is the business
performance in the past, & how strong is current performance? (pg 51)
Risk: What type of risk is our business currently exposed to?
Financial Environment: How is it? Is it changing?
Helping Small Farmers Develop a Business Plan20
Financial Considerations
Profitability (pg 54)
Liquidity
Solvency
Repayment Ability
Efficiency
Helping Small Farmers Develop a Business Plan21
What Type of Risk Are They Exposed To?
Interest rates (pg 62)
Employment Inflation Government Action
These are all factors to be considered in SWOT analysis
Helping Small Farmers Develop a Business Plan22
Planning Task 3: Mission, Vision, & Goals
What is a Mission?
What is a Vision?
Goals: Describe what the decision maker would like to achieve (pg 87)
Must meet the criteriaSMACT
Helping Small Farmers Develop a Business Plan23
Planning Task 4: Strategic Planning & Evaluation
Strategy: a
(pg 103)
This is an important step in the process: Develop a business strategy Evaluate strategic alternatives Decide on the whole business strategic course Develop contingency plans
What functional area should be first? ABC Research example
“A careful plan or method for achieving an end.”
Helping Small Farmers Develop a Business Plan24
An Effective Business Strategy Addresses:
Markets: Who are the target customers & what do they value? (pg 107)
Product: Products offered & how unique? Competition: Who are the competitors &
how will the organization position itself? Distribution & Packaging: How & when
will the product be moved to the market? Prices: How will the product be priced? Promotion: How & what will be conveyed?
Helping Small Farmers Develop a Business Plan25
Identifying Potential Markets
How can you help them identify markets? Chambers of commerce Trade associations & membership directories USDA/Government sources Your knowledge & experience
S-T-P Marketing
Helping Small Farmers Develop a Business Plan26
Customer Segmentation
Geographic (pg 110)
Demographic
Needs/Preferences
Psychographic
Helping Small Farmers Develop a Business Plan27
Identifying Unique Product Features
It’s all about Competitive Advantage (pg 33)
Environmental and/or Social Benefits
Market research may be needed to uncover needs of existing & potential customers
Freshness
Quality
Helping Small Farmers Develop a Business Plan28
Understanding Sales Potential
Need realistic idea of sales potential (pg 110)
Sources of demographic patterns CACI Market System Group Sourcebook
http://www.caci.com/
SRDS Lifestyle Market Analysis http://www.srds.com/frontMatter/ips/lifestyle/
Departments of Ag: http://www.doacs.state.fl.us/ USDA: FSA, NRCS, Rural Development, SARE US Census Bureau http://www.census.gov/
Myflorida.com: http://www.myflorida.com/
Helping Small Farmers Develop a Business Plan29
Distribution Scope
product distribution: widespread placement of the product at low prices (pg 115)
product distribution: using a small number of intermediaries, usually retailers
product distribution: exclusive stocking rights to a wholesaler or retailer
Intensive
Selective
Exclusive
Helping Small Farmers Develop a Business Plan30
Promotion Strategy Should Include:
Message: What should customers know about their products (pg 126)
Tools & Delivery: How will the message be communicated?
Timing & Frequency: How often will customers be contacted?
Costs: How much will promotion cost?
Helping Small Farmers Develop a Business Plan31
Operations Strategy
Production Mgt: What alternatives will be considered? (pg 134)
Regulation & Policy: Institutional needs?
Resource Needs: Future needs?
Gaps: How will they fill these needs?
Size & Capacity: How much?
Storage & Inventory Mgt
Helping Small Farmers Develop a Business Plan32
Human Resources Strategy
Labor Needs: Future needs? (pg 145)
Skills: What is needed to meet needs?
Gaps: What are the gaps, how filled?
Compensation: How to pay?
Mgt & Communication: Who will manage & how?
Helping Small Farmers Develop a Business Plan33
Financial Strategy
Risk: Future business environment and how it will be managed (pg 154)
Risk mgt alternatives (pg 156)
Organization: Legal structure of the business Legal organizational structures (pg 158)
Financing: How will the business be financed to meet capital requirements? Financing alternatives (pg 160) Financial assistance options (pg 162)
Helping Small Farmers Develop a Business Plan34
Calculating Profitability
Financial Measures Net return (pg 168)
Break-even volume Break-even value
Study the impact of a new business idea on a
present business’ profitability & cash flow
Long-range Planning Projecting whole business profitability
Partial Budgeting
Helping Small Farmers Develop a Business Plan35
Choosing The Best Strategy
Decision makers need to decide? (pg 179)
Stay with current business plan Adopt an alternative strategy Reconsider new alternatives
Consider Strategy Fit Tests (pg 180)
Develop a contingency plan Use of scenario planning
Helping Small Farmers Develop a Business Plan36
The All Important Business Plan Executive Summary
Identity: Who they are & their name (pg 184)
Location: Where business is located
History: How long in operation
Ownership: Current structure
Industry/Competition: Competitive position
Helping Small Farmers Develop a Business Plan37
Executive Summary cont.
Product: Current & future offerings (pg 184)
Operations: How will they produce
Human Resources: Who will manage and how
Finances: How much profit will be generated & how the business will be financed
Helping Small Farmers Develop a Business Plan38
Additional Resources
Purdue University’s Business Planner https://www.agecon.purdue.edu/planner/
Thank You
For more information visit the Small Farms web at http://smallfarms.ifas.ufl.edu
Take a virtual field day tour by visiting the Virtual Field Day web at http://vfd.ifas.ufl.edu
This presentation brought to you by the
Small Farms/Alternative Enterprises Focus Team.
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