The Game Plan Farm Business Planning Rodney Jones

The Game Plan: Farm Business Planning Rodney Jones Rodney. jones@okstate. edu 405 744 6173

Introduction - Business Planning n The “game plan” q The issue is not where profits are now q The issue is where profits will be in the future q In a competitive industry continuous improvement is necessary q Low cost production is imperative for growth and prosperity

Benefits of Formal Planning (Developing a Written Plan) n Stimulate thinking about the future n Provide structure to decision making n Better understand the business, and the changes it is facing n Provide benchmarks n Prioritize and clarify goals n Test ideas on paper n Facilitate communication, and coordinate decisions

Benefits of Formal Planning (cont). n Answer questions posed by others (family members, lenders, etc. ) n Document your ability to manage, plan, and communicate in a proactive manner n Development of a more precise thought process (make better decisions) (the plan is not as important as the planning process) n Help focus on the business “Competitive Advantage”

Possible Components of a Formal Business Plan n 1. n 2. n 3. n 4. n 5. n 6. n 7. Executive Summary Business Description Products and Operations Plan Sales and Marketing Plan Management Org. & Staffing Plan Financial Plan Other

1. Executive Summary n May Be The Most Important Component n Discuss the “People” n The Opportunity n Succinctly describe why the business will succeed n The Context n Overview of Risks and Rewards n Think “Shark Tank” Presentation

2. Description n Type of Business, Products, Services n Business History n Who Are The Current “Stakeholders” n What Resources Do We Have To Work With n Physical Resource Emergency Plan

3. Production and Operations Plan n Product, Production Process, and Production Scheduling Plan q Commodity vs differentiated n Production Quality Control Plan n Environmental Stewardship Plan n Regulations and Licensing Issues n Production Risk Management and Emergency Plan

4. Sales and Marketing n Marketing the product or service n Marketing Risk Management Plan n Marketing yourself and the business in general q Landlords q Lenders q Employees q Community n Quality Control n Inventory Management

5. Mgmt. Organization and Staffing Plan n Legal Structure n Organizational Structure n Human Resource Inventory and Staffing Assessment n Human Resource Risk Management and Emergency Plan

Three Important “Structures” n Organizational/Management Structure n Legal Form n Financial Structure

6. Financial n Current Financial Assessment q Balance Sheet, Income Statements, Cash Flow Statements, Statement of Owners Equity n Financial Evaluation of Alternatives q Enterprise Budgets, Cash Flow Budgets, Pro. Forma Projections n Capital Investment Analysis n Monitoring Mechanisms (MIS) n Capacity and Willingness to Assume Risk n Dealing with Stress

Financial Structure n The legal structure may dictate the financing options available q Venture capitalists, general public, etc. may feel more comfortable with a corporate legal structure q Long term investors like to see an organizational structure that facilitates growth

7. Other n Actions To Be Taken n How Will We Monitor Performance n Business Transition Plan q Transition to new size q Transition to new enterprise mix q Transition to new production methods q Transition to next generation q Etc. n Emergency (likelihood and impacts) n Supporting Documentation

The Strategic Plan Component of the Overall Business Plan n Values, Vision, Mission, Objectives, Goals n Internal and External Factor Analysis (SWOT)

Business Vision Statement n Provides a guiding philosophy n Influenced by strengths and weaknesses n Reflect “core values” n Should inspire (Dream Big Picture) n Should unite stakeholders (Involvement From All) n Demonstrate Uniqueness (Competitive Advantage What we would like to be

Mission Statement n Normally short and to the point n Specific, embodies the broader vision n Size, scope, composition of products (Customer Oriented) n What we are all about now n Requires involvement from all stakeholders Who we are

Vision vs. Mission n Vision is broad and future oriented q What we would like to be n Mission is more focused on what we are all about today and who we are trying to serve q Who we are

Goal Setting n Goal Setting q Objectives and Goals define manageable steps to vision and mission accomplishment. q Goals work because they: n n n provide information for all stakeholders focus attention and action mobilize energy and effort increase persistence encourage development of good work habits provide measurement benchmarks

Long Term Objectives n DRIVE q Directional (move you toward your vision) q Reasonable (attainable) q Inspiring (positive challenge) q Visible (easy to visualize) q Eventual (will be fulfilled at a future time)

Short Term Goals n Short Term Goals q Effective goals are SMART: n n n Specific (detailed) Measurable (can determine results) Attainable (within economic and physical capabilities) Rewarding (satisfying) Timed (have a deadline)

Summary (Key Points From This Section) n Agriculture is a competitive industry q Must be a low cost producer q Or, must maintain a niche n Formal business planning is all about “competitive advantage” n “Strategic” business planning is thinking longterm – Developing a Vision-Mission, along with associated objectives and goals n Business planning is a never ending management task

Thank you: n Please complete a very brief survey of this webinar by clicking on the link (also in the chat box at the lower right corner of your screen) n https: //okstatecasnr. az 1. qualtrics. com/jfe/for m/SV_2 ggz. EO 68 b 9 s 4 ZTf n e-Farm Management Training: http: //agecon. okstate. edu/efarmmanagement/ index. asp