2013 Extension Risk Management Education National Conference
BUSINESS PLANNING FOR BETTER
RISK MANAGEMENT
Winifred W. McGee, Senior Extension Educator
Lynn F. Kime, Senior Extension Associate
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
Roles of Farm Business Planning
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•
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•
•
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
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.
Many Uses for a Plan
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•
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•
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Strategic Planning
Marketing
Expansion
Contingency Planning
Obtain Financing
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
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!
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
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!
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
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
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
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
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
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
Selection of Business Structure
Sole Proprietor
Corporation (S- or C-)
LLC
Non-Profit
Not Sure
6% 6%
37%
38%
13%
Progress Toward Direct
Marketing
15
10
5
0
Defined
product &
market
Defined
product
No definite
product
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
Sources of Information for the Plan
Internet Browsing
On-line Library
Print Library
Observation
Prof Associations
Focus Groups
Apprenticeship
2%
3%
22%
27%
14%
24%
8%
Making and Using Accurate Financials
20
10
0
Members of Advisory Committees
14
9
6
6
8
8
10
1
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
Stracks Tree Farm
Ladys’ Center Mills Farm, LLC
Lindenhof Farm, LLC
Patches Family Creamery
Building an Enterprise Plan
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Time investment
Written down
Networking with others
Think things through
PLAN FOR SUCCESS