- What is a Business Plan?
- How to Prepare a Farm Business Plan
- How to Write Executive Summary of a Business Plan
- Business Plan Competitions: Tips to put your business plan at the top
- Pro Forma Financial Statements and Business Plan Budgets
- Using a SWOT Analysis with your Business Plan
- Business Plan Terminologies
What is a Business Plan?
Defining a business plan can be difficult, as the definition might be different for every organization. A business plan, in its simplest form, will usually define where you want your business to be within a certain period of time (usually five years) and how you plan on getting there. A business plan is as important for starting a business as blueprints are for building your house.
Purpose of a Business Plan
When starting a new farm business, writing a business plan is an important first step to getting started. A business plan will lay out the direction for the future of your farm and begin to establish standards for success. A complete business plan should include five-year financial projections. These projections will assist investors with making decisions about your business and help you to know how much funding you will need to get things rolling.
A farm business plan should define how you would like to operate your farm. This includes describing the management team, the marketing strategy, and the methods in which you will interact with customers. A business plan might project a strategy that reflects the management style of the founders of the business. The definition should be clear but flexible.
Business plans are developed for many purposes. One company might be looking for funding from investors. Another company might be looking for a loan from a bank. Your company might just need to plan out the company’s strategy to make sure it is successful. Whatever the case, every farm business needs a business plan.
Importance of a Farm Business Plan
If you are starting a new farm or looking for additional funding for your current agribusiness you have probably realized that you need to develop a business plan. The importance of developing a business plan cannot be understated.
- A business plan gives your farm direction and purpose. The farm business owners should develop the business plan together.
- The business plan writing process will give your company’s owners a good understanding of your company’s competitors, customers, and industry.
- When it is finished you will have a better understanding of your company’s strengths and weaknesses. A business plan defines the business, determines the feasibility of the business, and serves as a tool to manage the operations of your business.
If you are not certain about the contents of a business plan, please refer to the business plan outline below. You can search and download Business Plan Templates online. Another, more expensive option, would be to hire consultants to assist you with writing the business plan. Whatever route you decide to go, it is very important that the owner of the business write the plan. Not only does the owner have the best understanding of the business plan, but he or she also will benefit the greatest from the process.
After you have completed the research for your business plan, keep it handy and update it frequently. Keeping your business plan current will greatly benefit your business if you need funding again in the future.
How to Prepare a Farm Business Plan
Preparing a Farm Business Plan can be difficult and time-consuming, but the end result is very rewarding. Researching your business and its outside influences can have a significant impact on your company. Eventually, the pieces will fit together and you will be left with the satisfaction of understanding the ins and outs of your business.
Before you write your business plan, you should do a little preparation. Ask yourself the following questions:
- Is this business technically feasible?
- Is there a market for your idea?
- How tough is the competition?
- Do you have enough experiences and resources to successfully execute the business?
- Is the market for the business growing or declining?
Preparing to write a farm business plan by asking yourself these simple questions can let you know whether or not your great idea is really a great opportunity. Business plan preparation can follow a couple different models. I recommend a model where you develop the different aspects, such as the marketing and financials, together around your business plan. Preparing your business plan in this way will create cohesiveness throughout your organization.
Business plan preparation is an art, but there is also a method to the process. When preparing a business plan, you will always want to include an executive summary, brief overview of the company, analysis of your market and industry, your marketing plan, an operations plan, a summary of the management team, and a financial summary.
Outline of a Business Plan
Here is an outline of the sections that a business plan should include. Keep in mind that every business is different and that every business plan will also be slightly different.
- Executive Summary
- Investment Considerations
- Description of the Farm or Agribusiness
- Analysis of the Industry
- Analysis of the Target Market
- Analysis of the Competition
- Positioning Trends and Target Market
- Sales Strategy
- Management and Organization
- Milestones and Exit Strategy
- Financial Projections
The first step to writing a farm business plan is identifying the parts of a business plan that you need to include. Luckily, the business plan layout is fairly standard. Banks and investors have established standards for the types of information they’d like to see. In the end, it is important that you include all the parts that they need to make a decision as to whether or not the business has the potential to be successful in its market. Your business plan is not limited to these parts, but it should include all of them.
In almost every case, a business plan should start with an Executive Summary. This is one of the most important parts of your business plan. The executive summary gives an overview of the important points that will be covered in your proposal. If you feel it is imperative that the reader know something about your business, include it in the executive summary. Many will start by reading this section and then go to the body of your business plan for more details on information that catches their eye. Along with the executive summary, you’ll want to include Investment Considerations if you are seeking funding for your business.
The Farm Description should define your farm business. Along with basic information, you’ll want to include information on the major shareholders and the products or services that the farm offers.
After summarizing the company, your business plan should describe the environment in which it operates. Analyze the industry in your Industry Analysis and then analyze the Target Market and Competition. If you have already developed your marketing plan you can summarize the information from this plan in these sections.
Next, you’ll want to describe how your farm will operate within its environment. Describe trends in the market and how you will position your farm in relation to these trends in the Positioning Trends & Target Market section. You can also summarize your marketing plans in the Marketing Outline & Sales Strategy section. Again, it is helpful if you have already developed your marketing plan when writing this section.
After describing your marketing strategy, describe how your farm will operate in the Operations section of your business plan. Include information on equipment, production, inventory, customer service, and any other operational issues that the company will face. Include a description of the technology that your farm will use in the Technology Outline.
Investors will want to know who will be running the business. That’s why it’s very important that you include biographies of your management team in a Management & Organization section. Layout your organizational structure and who will be running the farm business.
Finish off your business plan with Milestones & Exit Strategies and the Financial Data & Projections. The Milestones & Exit Strategy section gives investors an idea of how you will evaluate your business and what you plan on doing with the business. The Financial Data & Projections usually includes an income statement, balance sheet, and statement of cash flows.
How to Write Executive Summary of a Business Plan
The executive summary for your business plan will be, by far, the most read section of the plan. It needs to capture the interest of the investor and motivate them to delve deeper into your business plan. You need to invest time and effort into making sure that your business plan executive summary clearly outlines the primary objectives of your business plan.
Even though this section is vital, put off writing your executive summary until you finished with your business plan. Why? Simply because the executive summary needs to summarize what your business plan contains. It doesn’t make sense to write the executive summary until you’ve completed writing your business plan. Also, the recommended method for writing your business plan executive summary requires that your business plan be complete before you start.
Your executive summary shouldn’t be longer than 1/10 of the length of your business plan. That means that if your business plan is 40 pages long, your executive summary shouldn’t be longer than 4 pages.
Print out a copy of your farm business plan and read through the plan, highlighting any points that you believe are vital for investors to know right away. After you have gone through and highlighted the points you thought were important, go through and evaluate the importance of each point and cross out any that might not be necessary. You don’t want what’s really important to get muddled in with the information that might not be quite as important.
Type up a list of each of the points you have selected from your business plan. Keep these points in the same order that they appeared in your business plan. It is helpful for the business plan’s executive summary to follow the same general outline as the business plan. After you have your list of main points, write a sentence that is simple and direct which states each of these points. Add supporting information to each point as needed.
Type your executive summary in paragraph form. Skim through it and make sure that it clearly conveys the main points in your business plan. If you miss the main points, edit the executive summary to bring them out. Now, read through the summary carefully and check for errors. When you’re satisfied that your executive summary will accomplish its purpose, you’re done!
Business Plan Competitions: Tips to put your business plan at the top
Business Plan Competitions are great ways for students and young entrepreneurs to find funding for their business ideas. Funding isn’t the only benefit of entering the competitions though – you’ll also be given the opportunity to network with some of the area’s top entrepreneurs and get personal business advice that you might not be able to get elsewhere. Once you get the confidence you need to actually enter your plan into the competition, follow this advice to make sure that you’re competitive.
The first tip is probably obvious, but it is important that you present a well-written business plan to the business plan contest judges. Sloppy business plans won’t come out on top. Make sure that you include all the sections normally contained in a business plan and address any concerns that might come up.
Second, make sure that you carefully follow the guidelines set forth for the competition. Some competitions have rules about sponsorship, team size, resubmitting business plans, etc. so make sure that you read and re-read all the business plan competition rules.
Be ambitious, but don’t be ridiculous. Does your business really need 3 million naira to get going or could a more conservative number work just as well? If you want your business plan to be taken seriously, make sure that you make the case for whatever funding you need.
Write your business plan using a template and pay close attention to the questions that are asked in the template. These are the same questions that the judges will ask you about your ideas.
Make yourself shine in your business plan! This isn’t a time to be modest. You need to show investors that their money is in good hands if they invest in your company. Include your background, accomplishments, history, and experience in your business plan.
Finally, be confident. Confidence with your business plan proposal comes from being prepared and well-informed. Show the judges that you’ve got what it takes to be successful in the future.
Pro Forma Financial Statements and Business Plan Budgets
A pro forma financial statement is a hypothetical financial statement based on assumptions. With your farm business plan, these assumptions will deal with your revenue and expenses.
Your farm business plan should include three basic financial statements: a pro forma income statement, balance sheet, and statement of cash flows. Without these financial projections, it would be difficult for a bank or any investor to justify lending you money because it isn’t possible to tell whether or not your farm or agribusiness is viable and sustainable.
An income statement is basically an outline of your company’s revenue and expenses. It shows the total sales, cost of goods sold, earnings before interest and taxes, and net margin. This statement will show the “bottom line” and lets investors see whether or not your company will be profitable.
A pro forma balance sheet is used to determine whether or not your company will be economically efficient and financially strong. This compares your assets with your liabilities and shows the “balance” between the two.
The third financial statement you’ll want to include in your business plan is the statement of cash flows. This statement shows the flow of cash into and out of a farm. It also shows the source of this cash and how it is being used.
The income statement is a very common business financial report. Every business owner should be able to read, and understand, an income statement. Using the income statement and other financial statements, you can calculate ratios which will help you analyze the performance of your business. You will want to include a projected income statement in your business plan. The income statement shows the revenue and expenses for a given period of time. Here is a sample income statement:
Using a SWOT Analysis with your Business Plan
When investors are reading your business plan, they want to see an accurate representation of what your farm has to offer and how it might be vulnerable. A comprehensive farm business plan will clearly outline their investment possibilities and risks. You can effectively provide this information by using a SWOT analysis in your business plan.
The SWOT Analysis is a classic business method for analyzing a company. SWOT stands for strengths, weaknesses, opportunities, and threats. The strengths and weaknesses section is an internal analysis of the company, while the opportunities and threats section deals with the industry and market in which your company operates.
Begin your SWOT analysis by listing the strengths of your company. Your company strengths are the things that you do or have which give you an advantage over your competitors. Perhaps you have been in the market longer so you have a head start on the competition. You might have a patent that protects your products from being duplicated. List all the strengths of your company. When you write the analysis, you will also want to include why they are strengths.
The second section of the SWOT analysis is a list of your company’s weaknesses. Be honest in your assessment, but also include things you are doing to either minimize the impact of these weaknesses or make the weakness a strength. Since this section is part of the internal analysis, these items should all be things you can control. For example, a weakness might be that your product line is not as developed as the competition. Another might be that you do not have access to technology that would benefit your company.
After you have completed your internal analysis, you should begin an analysis of the external forces on your company. Analyze the opportunities that are in the market, and ask yourself if there an area that is underserved that could be a new niche market. Look at changes happening in the industry and find opportunities for your business in these changes.
The last section in the SWOT analysis is the threats to your company. These are market forces that could hurt you that you cannot directly control. Is government regulation a problem in your industry? Maybe there is a new competitor that is posed to take a chunk of your market share. Your business plan should include the farm’s plans for addressing these threats if they become a problem.
Once you have completed your SWOT analysis, you have created an important tool for your business. This analysis can be very helpful in determining the strategic direction of your business. Using a SWOT analysis in your business plan is an easy way to address many of the questions that investors will ask.
Business Plan Terminologies
If you’re writing a business plan, you’re probably not a dummie, but that doesn’t mean that you already know what all that business plan lingo means. Here is a list of words that you’ll want to understand before you start writing your business plan.
- Angel Investor – A person who provides early-stage businesses with start-up capital.
- Balance Sheet – A financial statement that shows a company’s assets, liabilities, and net worth for a given period of time.
- Competitive Advantage – Any advantage gained over competitors as a result of offering better value, either with a lower price or providing more benefits to justify a higher price.
- Competitive Analysis – The process of identifying key competitors and evaluating their objectives, strategies, strengths, and weaknesses. This assists with determining which competitors you will pursue and which ones you will avoid.
- Cost of Goods Sold – The net cost to the company of the products or services that it sells.
- Gross Margin – The difference between net sales and the cost of goods sold.
- Gross Sales – The total revenues from what a company charges in a given period of time.
- Income Statement – A financial statement with a summary of a company’s revenue and expenses from a specific period of time.
- Macroenvironment– Demographic, economic, natural, technological, cultural, and political forces that affect the business environment.
- Market – All potential buyers and sellers of a product or service
- Market Segmentation – Diving a market into groups that might require separate products or marketing efforts based needs, characteristics, or behaviors
- Financial Ratios – Ratios of selected financial items that are used to compare a company’s performance from one year to the next.
- Target Market – A set of buyers with common needs that the company would like to serve
- Pro Forma – A hypothetical financial statement used in a business plan to project performance. These are based on assumptions.
- SWOT Analysis – SWOT stands for strengths, weaknesses, opportunities, and threats. It is a method for quickly analyzing the status of a business.