Six things every business plan needs
A business plan doesn’t need to be complicated – but it should include information that’s useful.
Wendy Osborn, Regional Vice President | Farm Credit Mid-America
It’s easy to know you need a business plan, but it’s harder to know exactly what to include. Business plans tend to follow a standard format, and many online resources and templates online can be adapted for your operation. Make your plan as simple or as complex as you like. The main goal is to create a plan that is useful to you and meets your needs.
At Farm Credit Mid-America, we recommend including the following components in your business plan:
- Operation overview. This is the “elevator pitch” about your farm. Describe the basics of your operation related to your mission and objectives, crops you produce and acreage.
- Ownership summary. Include information about ownership and company structure. With any type of business, different owners bring different expertise. It’s always good to evaluate each owner’s strengths and what he or she brings to the operation.
- Strengths and weaknesses. Identify ways to use your ownership team’s strengths to your advantage and plan for ways to overcome any weaknesses in your operation.
- Sales and marketing strategy. Once you have identified your operation’s strengths, look for opportunities to leverage them to your competitive advantage as you create sales and marketing strategies.
- Financials (budget and balance sheet). This is the most important part of your business plan. Include a budget and a balance sheet that reflects your assets, liabilities and net worth.
- Goals. Research has shown that the simple act of recording goals will increase the likelihood of achieving them.
In the budget section, project income and expenses for the upcoming year. This is not a time to be optimistic. It is best to plan for the worst-case scenario. Try to avoid underestimating expenses or overestimating income.
The balance sheet helps you understand and evaluate working capital and net worth. Comparing balance sheets year-over-year offers a good picture of how your operation is progressing toward your goals. Your net worth should increase steadily each year. If not, that’s a red flag.
Write down both short- and long-term goals, such as purchasing a new combine or paying down debt. Your goals should be SMART (Specific, Measurable, Achievable, Realistic, and Timebound). Remember to involve all owners in identifying and setting goals.
Also, identify risks that may impede your goals and create a contingency plan for them. The more you prepare for challenges, the easier they will be to deal with when they do occur. For example, crop insurance is one smart way to mitigate damages from drought, flooding and other natural disasters.
Including the above components will ensure your business plan works hard for you and your operation. Be sure to update your information and revisit your plan on a regular basis. An accurate and updated business plan is a powerful tool that can open up many opportunities.
For additional financial tips, insights and perspectives, visit Farm Credit Mid-America Insights.