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Why all young farmers need a business plan in 2018

As 2018 descends, many farmers could be contemplating consolidation or change, but behind every good business there must be an even better plan to help achieve any desired goals.


Danusia   Osiowy

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Danusia   Osiowy
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Here's why all young farmers should have a business plan in 2018 #StartingInFarming

For many farmers creating a business plan feels like a hindrance and a headache. So what are the advantages of creating one and why bother going to the trouble when other people seem to get by without one?

 

Jennifer O’Toole, senior partner at accountancy firm Thomas R. Dixon, says: “A business plan is like a flight path. It lets you know where you want to go, what you want to achieve, what you have to do in order to achieve your goals and probably, most importantly, what problems you can expect along the way.”

 

And if you are looking for finance, then a business plan can make a difference.

There is a wealth of online material available if you are thinking of going it alone, including endless templates from the main banks providing detailed checklists, questionnaires and sample plans to help get you started.

 

But what no website, prototype or book can provide you with is the passion, creativity and vision you need in order to go ahead and write one.


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Ten top tips to write a good business plan

  • Vision: Start with outlining your vision for your farm business. If you don’t know where your business is going how can you possibly plan the way to get there?
  • Aims: Look back as well as forward. Business planning is as much about where you have been and the experience you have gained as where you intend to go.
  • Objectives: Business planning is about plotting a journey, so consider short, medium and long-term objectives over the next three, five and 10 years or more. It should be a ‘living’ document – so once written, review it regularly and rewrite periodically.
  • Truth: Be realistic in assessing your business development, the market and future opportunities. A business plan that is unrealistic or sets unachievable targets if of no use to anyone. It’s sensible to assume that area-based Basic Payments will run down on a phased basis from 2021 onwards and Pillar 2 payments will be available but only for environmental or tourism projects which may have limited profitability.
  • Costs: A business plan can be as much about standing still, or even contraction. Growth is not always an essential requirement. A review of all costs and value gained is likely to be essential.
  • Factors: Think about all the external and internal factors that could influence the future success of your business, what impacts they might have and what you can do to offset them.
  • Unite: Dovetail your business planning with your tax planning and succession planning. All three should inter-relate.
  • Funding: If you are looking for any external funding, a business plan is an essential part of your toolkit. It’s much better to be prepared and have one ready in such circumstances than be told you need to produce one in a hurry.
  • Resource: Use what resources are available. This Gov.UK website is a good place to start – www.gov.uk/guidance/farm-business-and-financial-planning
  • Talk: Don’t write your business plan in isolation – you may think you know it all but there may be a better way, and informed comment and criticism will help your plan to be more balanced. Speak to partners, family, colleagues and advisors to arrive at a well-rounded plan that is realistic and all agree will work.

What to actually include in a five-year plan:

  • The introduction:
  1. Cover sheet to include name, address and all other contact details for the business
  2. Statement of purpose which captures the essence of proposed business
  3. Table of contents
  • The business:
  1. A description of the business – legal identity (sole proprietorship, partnership, co-operative, etc) what are your products and services; what are your markets and who are your customers?
  2. Location – where is it, why there, important attributes such as acreage, soil and water resources, rental or ownership, terms of lease, what is your catchment area, parking
  3. Management – who does what and why, your management training, skills and experience
  4. Personnel – Current and future number of employees, their qualifications, rates of pay, training, benefits and how they
    are managed
  5. Insurance – what have you got in place and future needs
  • Marketing:
  1. Who will be your primary customers?
  2. Customer demographics – age, sex, income, education, lifestyle, where they live
  3. What is your major competitor and what is their location, strengths, weaknesses as well as your comparative strength and weaknesses
  4. What are the trends in the market based on data available on your product and customer
  5. Predicted sales of your product in quantity over the five years
  6. Services needed for marketing – storage, packing, digital design, advertising, transportation
  • Finances:
  1. What is your source of fund(s), how and when will they be used?
  2. Profit and loss statements – last three years or projected for next two years if start-up
  3. Balance sheets – what are your assets and liabilities and what are the projections for the next three years?
  4. Cashflow statement – income and outcome statement on a monthly basis for the last three years
  5. List of collateral, debts, and financial agreements made with others
  6. Capital of current equipment, including dates purchased and the amount
  7. Capital of equipment needed – estimated cost and time line
  8. Historical data – last three years of business tax returns
  • Supporting documentation:
  1. A mission statement
  2. Personal financial statement
  3. Letters of reference
  4. Credit reports
  5. Product or service literature
  6. Leases, contracts, letters of intent
  7. Anything additional that can strengthen your plan such as photographs, equipment, product, branding, evidence of market research

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