Regardless of whether you are a beginning entrepreneur who has recently inherited a business, an experienced farmer who is considering on-farm processing, or a retiring business owner who is looking to pass on the farm, business planning is important. It is an ongoing process that begins with the identification of values and ends with a strategic plan to address critical management functions. Like many rural entrepreneurs, you may have a strong sense of the values that drew you to the land or inspired you to begin a business. You may also have a clear set of personal and business goals that you would like to pursue “when the time is right.” But, if you’re like most farmers and rural business owners, you run into problems when trying to incorporate values and goals into day-to-day business decisions. How can you build a balanced and sustainable business—one that reflects your values and is successful—in the long run? Unlike most other business planning tools, Building a Sustainable Business: A Planning Guide for Farmers and Rural Business Owners takes a whole-farm approach. You will consider traditional business planning and marketing principles as well as your personal, economic, environmental and community values—those less tangible things that are a part of your thoughts every day, but which often don’t become a planned part of your business. You will be asked to integrate values with business management practices throughout this Guide.
Structure of This Guide
This Guide is divided into five chapters—each reflecting a critical “planning task.”
- Task One: Identify Values—What’s Important to You?
- Task Two: Review History and Take Stock of Your Current Situation— What Have You Got?
- Task Three: Clarify Your Vision, Develop a Mission Statement and Identify Goals—Where Do You Want to Go?
- Task Four: Strategic Planning and Evaluation—What Routes Can You Take to Get Where You Want to Go?
- Task Five: Present, Implement and Monitor Your Business Plan— Which Route Will You Take and How Will You Check Your Progress Along the Way?
Within each Planning Task, the four key functional planning areas are addressed: marketing, operations, human resources and finances. In Planning Task One, you and your planning team (family, business partners, lenders) will identify the values that bring each of you to the table. Planning Task Two asks you and your team to document business history and take stock of your current situation. In Planning Task Three, you will clarify a future vision for your business as well as develop goals and a mission statement that reflect the values you identified in Planning Task One. Planning Task Four addresses the crux of your business plan: the development and evaluation of strategic marketing, operations, human resources and financing alternatives. Finally, in Planning Task Five you will pull everything together into a written business plan.
Building a Sustainable Business Real Stories
Mabel Brelje: Certified organic small grain, corn, and soybean grower located in Glencoe, Minnesota. Mabel began the planning process shortly after receiving organic certification in 1998. At that time, her planning needs were three-fold and revolved around human resources, operations and marketing issues. Her primary planning issues concerned: (1) chronic labor and equipment shortages; (2) lack of established, reliable markets; and (3) the need to find a buyer for the farm. Within each task, you’ll find examples of completed worksheets from five of the farmers who completed business plans for their enterprises using this guide.
Mary Doerr, Dancing Winds Farm: On-farm goat cheese producer and bed and breakfast operator located in Kenyon, Minnesota. Mary had been operating her farm business for 14 years prior to developing her business plan as part of the MISA review process. At the time, Mary’s planning objectives included improving financial management, increasing the number of B&B guests, and developing an apprentice-ship cheese-making program on the farm.
Frank Foltz, Northwind Nursery and Orchard: Edible landscape nursery stock grower and marketer located in Princeton, Minnesota. Frank had operated his family business for 17 years when he drafted a business plan to ready the catalogue portion of his business for sale to an outside buyer and to map out a long-term plan for on-farm nursery stock sales, tourism, and homesteading education.
Dave and Florence Minar, Cedar Summit Farm: Large- scale dairy graziers located in New Prague, Minnesota. They operated the farm together for 30 years before preparing a business plan in 1999-2001. The Minars’ primary planning objective was to evaluate on-farm milk processing as a strategy to reduce year-to-year income volatility and to create permanent work for several of their adult children. Dave and Florence shared their worksheets and business plan with MISA. You will see examples from their planning experience and their final business plan for the newly created Cedar Summit Creamery throughout this Guide.
Using This Guide
This Guide is intended to be user-friendly—written so that anyone should be able to walk through the business planning process by following the Planning Tasks.
As you begin the planning process, try to work through the tasks as they are ordered and to consider all four of the functional areas within each task, since these aspects of business management are interrelated. However, it is equally important to work through this Guide in a way that makes sense given your needs and time constraints. You may not be able to address all of your planning needs the first time through this Guide. It may be more important to simply begin the process of planning and to recognize that it will be an ongoing project.
Some of the Planning Tasks are quite involved, such as Task Four, in which you develop alternative business strategies. As you go through each consideration for each of the marketing and finance alternatives, it can be easy to forget where you are! We’ve provided a flow diagram that we’ll repeat at the beginning of each section, to help you keep track of where you are in the planning process and show you how it relates to the big planning picture.
Each Planning Task also ends with a section about which parts of your work from that Planning Task should be included in a final business plan. You can also use the FINPACK Business Planning Software to help you assemble the final plan, and use the data directly from financial Worksheets.
Before You Begin: Why Develop a Business Plan and Who Should Be Involved in the Planning Process?
New and experienced business owners, regardless of history or current situation, can benefit from business planning. As an experienced producer, you may develop a business plan to: map out a transition from conventional to organic production management; expand your operation; incorporate more family members or partners into your business; transfer or sell the business; add value to your existing operation through product processing, direct sales or cooperative marketing. It’s never too late to begin planning! If you are a first-time rural land owner or beginning farmer who may be considering the establishment of a bed and breakfast or community supported agriculture (CSA) enterprise, business planning can help you identify management tasks and financing options that are compatible with your long-term personal, environmental, economic, and community values.
Business planning is an on-going, problem-solving process that can identify business challenges and opportunities that apply to your marketing, operations, human resources and finances, and develop strategic objectives to move your business beyond its current situation toward your future business vision.
Once developed, your business plan can be used as a long-term, internal organizing tool or to communicate your plans to others outside your business. Use your business plan to:
- Make regular or seasonal marketing, operations, human resources and finance decisions.
- Pursue long-term personal, economic, environmental and community goals.
- Develop a business profile for communicating within or outside your family to potential business partners, lenders and customers.
Before you begin working through this Guide, take a few moments to consider where you are in the business life cycle and why you are developing a business plan. Are you just beginning? Ready for growth? Planning to consolidate and transfer out of the business?
The Business Life Cycle:
- Start/Begin
- Growth
- Consolidate
- Transfer/Sell
Based on your position in the business life cycle, what do you want to accomplish? Do you need to explore a critical finance- or operations related challenge that you currently face? Research a perceived marketing opportunity? Prepare for an anticipated internal change in human resources? Most likely you have several, interdependent planning motives. This Guide is designed to help you work through many of them. Be aware, however, that retirement and farm transfer issues are not treated directly in the text or Worksheets. If retirement and business transfer are your critical planning issues, you may benefit by working through the first few tasks (identifying values, reviewing your history and current situation, and identifying your vision and goals), before talking with an attorney or financial consultant to help you develop specific business liquidation or transfer strategies.
Once you’ve identified why you’re developing a business plan, you need to decide who will be involved in developing your plan. Your planning should ideally be done as a team—this will not only enrich brainstorming, but will also secure support for your plan by those who are involved in the operation. Your planning team can be thought of as business "stakeholders"—those people who play a key role in your operation or who will be involved in business and personal decisions. Stakeholders often include family members, employees, partners, renters, other producers, landlords, customers, resource organizations, input dealers, lenders, community members, and veterinarians or other technical experts. These critical stakeholders should be considered your “planning team.”
Use the Use the Why Are You Developing a Business Plan? Worksheet to think about your specific business planning issues and to help you identify your planning team.
If you are feeling overwhelmed and unsure about where to begin in the planning process, try narrowing your initial planning focus to one critical management area. For example, in the Worksheet at right, Cedar Summit Farm owner Dave Minar began the planning process by identifying a critical issue related to his dairy farm’s long-term human resources availability. Minar considers his desire to employ more family members through the farm business his critical planning issue; it is his motivation behind the idea for on-farm milk processing which Dave and his wife, Florence, explore and present in their business plan (Appendix A).
Once you’ve identified the critical planning issues that you would like to address with your plan, think about how your plan will be used. If you intend to use the plan as a guide to seasonal operations, you will want to focus on the practical aspects of implementation. If your primary planning objective is to attract a potential business partner or financing, you will need to devote more time and space to fleshing out your business vision, its financial feasibility, and a marketing description of your final product or service.