Ranch Business Planning and Management Why Plan The
Ranch Business Planning and Management
Why Plan?
The Business Plan n Mission or vision statement and goals n Key planning assumptions n Market analysis and marketing plan n Operations, organization, and management n Financial plan
Mission and Goals Mission Statement q Should reflect your values q Describe what you want the business to be and accomplish q Provides the basis for long-run plans Goals q Tangible and intangible q Short run and long run q Monetary and non-monetary q Used to anticipate problems and plan strategies to overcome them
Key Planning Assumptions n List the family and ranch resources – land, labor, financial capital, other capital assets, management n Identify planning restrictions and constraints n Name expected products or services n Identify market outlets
Operations, Organization, and Management n Define each individual’s role in the business n Develop an organizational chart for large operations
Small May Not Be Simple! Dan or Nancy Dan or Dan Nancy
My Way Terry Judy ME Sam Jane Randy
No Way Mom Dad Sam “Hired man” Son Daughterin-law
Our Way Bob Terry Judy Jane Sam Randy
Who Reports To Whom and Why May Not Be Apparent Grandma Son Grandson’s Wife Grandson Wife Employee 1 Employee 2 Employee 3
Operations, Organization, and Management n Identify most appropriate legal arrangement: sole proprietorship, partnership, corporation, etc. n Develop plans for allocation of profits
The Financial Plan n Initial financial requirements n Enterprise analysis n Historical and projected financial statements n Risk assessment n Break-even analysis
Farm and Ranch Realities Annual per acre payments: 20 year loan, 20% down
Cow/Calf Investment Costs
Enterprise Budgets Receipts Production, price Operating costs Input quantity, price Fixed costs Depreciation, interest, taxes, insurance www. agecon. okstate. edu/budgets
Importance of Personalized, Up-todate Enterprise Budgets Need to know cost of production to n Calculate break-even price n Develop marketing goals n Identify appropriate risk management strategies. Costs vary from farm to farm and year to year.
Whole Farm Budgets and Financial Statements n Summarize information from enterprise budgets n Provides a more complete picture of farm operations q Liquidity q Solvency q Profitability q Repayment capacity q Efficiency
Financial Statements for a Business n Balance Sheet n Income Statement n Statement of Cash Flow n Statement of Owner Equity
Balance Sheet n An indicator of: q The ability to bear financial losses (risk) q Business wealth or equity q The collateral for lenders if the business were liquidated q Information to address issues of estate planning, deferred tax obligation, generation transfer and retirement
Income Statement n Measures the extent to which a business generates a profit from the use of land, labor, management, and capital. n Remember, cash accounting or IRS tax records do not measure net income
Statement of Cash Flow n Cash provided by or used q Cash from operation q Cash from investing q Cash from financing q Other cash flow activities n Cash flow check q Reconcile q Unaccounted withdrawals
Statement of Owner Equity n Reconcile change in equity q Retained earnings q Valuation q Deferred tax n Shows components of change in equity q Contributions q Distributions
IFMAPS n A free, confidential service assisting Oklahoma farmers and ranchers with financial planning since 1985 n Trained financial specialists work with families one-on-one to develop financial statements and evaluate alternative plans n Contact the local Extension office, an area Agricultural Economics specialist, or call the IFMAPS office in Stillwater at 1 -800 -522 -3755
Records n Provide facts about the business n Include both financial and production records n Measure business performance n Allow producers to meet legal obligations, support loan applications, and arrange for insurance coverage
Maintain Cash Records on an Ongoing Basis n Hand record books q agecon. okstate. edu/farmbook n Quicken q Categories, classes q Cash flow reports q Step-by-step instructions for farm adaptation n http: //agecon. okstate. edu, Departmental Websites, Quicken q “Hands on” workshops
Using Records in Decisions n Develop measures annually n Be consistent in how the measures are developed n Note reasons for “unusual” measures n Use information to identify areas for improvement n Ask for help if you need it
Asset and Liability Inventories n Pad of paper n Online farm account book pages q agecon. okstate. edu/farmbook n OSU AGEC-791 and 792 n Spreadsheet n Integrated Farm Financial Statement (IFFS) software n Cow/calf production records q Hand record books, e. g. Redbook q Software n OSU CR-3279
Other Farm Management Resources n Budget templates agecon. okstate. edu/budgets/ n Livestock lease agreement spreadsheets Aglease 101. org (or osufacts. okstate. edu) n Publications www. osufacts. okstate. edu
Ten Commandments for Farmers/Ranchers n Focus on financial management as much as production performance. n Count your cows (and other assets) at least annually. n Keep your lender happy. n Code your checks, sort your expenses for enterprise accounting. n Develop a record-keeping and information system that supports your decisions.
Ten Commandments for Farmers/Ranchers n Pay taxes as often as possible. n Don’t expect too much from your cows. n Never stop learning. n Go slowly when attempting new things. n Match the livestock and crop enterprises to the land resource.
Options for Additional Business Planning Credit Complete Mission/Vision, Goals worksheet and organizational chart for your operation 1 hour credit Develop financial statements including enterprise budgets for your operation (IFMAPS assistance available) 3 hours credit Quicken workshop 2 hours credit Annie’s Project 8 hours credit
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