"Small Farm Business Plan Template"

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2.0 Small Farm
Business
Planning
Introduction
3
Lecture 1 Outline: An Introduction to Business Planning
5
and the Critical Elements of a Business Plan
Lecture 2 Outline: Review of a Sample Business Plan
9
Lecture 3 Outline: Cash Flow Spreadsheets, Cash Flow Planning, 15
and Proper Categories for Sources and Uses of Cash
Step-by-Step Exercise: Entering Your Financial Information
19
in the Small Farm Cash Flow Spreadsheet
Resources
21
Glossary
25
Appendices
1. Characteristics of U.S. Small Farms
27
2. Sample Business Plan
29
3. Business Plan Template
35
4. Sample Cash Flow Spreadsheets for the First Two
43
Operating Years
5. Cash Flow Template
47
6. Second Year Cash Flow Projections
49
Unit 2.0 | 1
Small Farm Business Planning
2.0 Small Farm
Business
Planning
Introduction
3
Lecture 1 Outline: An Introduction to Business Planning
5
and the Critical Elements of a Business Plan
Lecture 2 Outline: Review of a Sample Business Plan
9
Lecture 3 Outline: Cash Flow Spreadsheets, Cash Flow Planning, 15
and Proper Categories for Sources and Uses of Cash
Step-by-Step Exercise: Entering Your Financial Information
19
in the Small Farm Cash Flow Spreadsheet
Resources
21
Glossary
25
Appendices
1. Characteristics of U.S. Small Farms
27
2. Sample Business Plan
29
3. Business Plan Template
35
4. Sample Cash Flow Spreadsheets for the First Two
43
Operating Years
5. Cash Flow Template
47
6. Second Year Cash Flow Projections
49
Unit 2.0 | 1
Small Farm Business Planning
2 | Unit 2.0
Small Farm Business Planning
Introduction: Small Farm Business Planning
UNIT OVERVIEW
MODES OF INSTRUCTION
> LECTURE/DEMONSTRATION (presented in one half-day session
This unit provides practical advice on
or three 50-minute classes)
how to approach business planning
· Lecture 1 introduces the concept of business planning and
in the start-up phase of a small farm.
the critical elements of a business plan. Lecture 2 reviews a
Lecture 1 provides an overview of why
sample business plan, including discussion and interactive
exercises. Lecture 3 and the Step-by-Step Exercise review and
and how to plan. Lecture 2 provides
demonstrate a cash flow spreadsheet, and include discussion
a detailed examination of a sample
of elements of cash flow planning and proper categories for
business plan with interactive exercises.
sources and uses of cash.
The third lecture demonstrates how to
LEARNING OBJECTIVES
develop a month-by-month cash flow
CONCEPTS
projection for the first two years of a
· The rationale behind business planning
new farm.
· The essential components of business planning for start-up,
developing and mature farming enterprises
The main goal of this unit is to
SKILLS
encourage students to see holistic
· Ability to develop a basic 5-part business plan for a start-up
farming enterprise including: values and goals assessment,
business planning as a necessary and
resource analysis, market analysis, market plan, time
integral part of farming. For students
management plan, farming plan, and financial analysis
who have learned how to develop a
· Ability to develop a basic 2-year cash flow budget for a small
farm plan suitable to specific soils and
farm enterprise and assess the economic viability of the
operation
climates, this unit will teach them how
to think about modifying the farm
plan to address specific marketing
opportunities and resource limitations.
The objective of the unit should be that
each student leaves with a business
plan well started.
Unit 2.0 | 3
Introduction
Small Farm Business Planning
4 | Unit 2.0
Small Farm Business Planning
Lecture 1 Outline: Introduction to Business Plan-
ning and the Critical Elements of a Business Plan
Note: See also Building a Sustainable Business: A Guide to Developing a Business Plan for Farms
and Rural Businesses. Co-published by the Minnesota Institute for Sustainable Agriculture
and the Sustainable Agriculture Network (see Resources section).
A. The Rationale behind Business Planning
1. Time and money are often scarce resources
2. One will need to do research to generate accurate information on the economic viability of
a farm operation if one is to manage time and money successfully
3. Many small businesses fail
a. Wells Fargo study using data of the U.S. Census Bureau showed about half of businesses
that employ people are still operating five years after they open.The study estimates that
over the lifetime of a business, 39% are profitable, 30% break even, and 30% lose money,
with 1% falling in the “unable to determine” category (Business Week, September 30, 1999).
b. Businesses with fewer than 20 employees have only a 37% chance of surviving four years
and only a 9% chance of surviving 10 years. Of those failed business, only 10% of them
close involuntarily due to bankruptcy.The remaining 90% close because the business
was not successful, did not provide the level of income desired, or was too much work for
their efforts (Agricultural Development Center. ADC Info #24, October 1998. Agricultural
Extension Service, University of Tennessee).
4. Small-scale farming is much more difficult to succeed in financially than most other small
businesses – The financial viability of U.S. small farms (see Appendix 1: Characteristics of
Small Farms Differ Markedly from Large Farms, and Unit 1.0: Small Farm Viability Today)
a. 94% of all U.S. farms (1,945,190 out of a total of 2,068,000) are “small farms” (defined by
sales of less than $250,000)
b. 74% (1,531,760) of all U.S. farms are small farms having sales of less than $50,000/year,
with an average net cash farm income of negative $1,702
c. These farming operations rely heavily on non-farm income (e.g., off-farm jobs, retirement, etc.)
d. 20% (413,431) of U.S. farms have sales of $50,000–$250,000/year with an average net
cash income of $23,159
e. Therefore, entry-level farmers lacking supplemental or off-farm income must compete
with growers who have supplemental incomes (e.g., pensions, off-farm jobs) in an
environment where net farming income is low or negative
5. Potential disadvantages of entering agriculture without thorough business planning
– As agriculture is capital intensive it may result in the investment and loss of significant
amounts of both time and money
6. Proper business planning allows one to analyze the financial viability of the proposed
farming business and help one make more informed and strategic decisions that may
increase the chances of success and reduce the risk of financial losses
7. Business planning might also change your mind about entering farming, result in delaying
the start of your business until additional resources are secured, or might radically alter
your business concept toward options with greater likelihood of financial success
Unit 2.0 | 5
Lecture 1 Outline
Small Farm Business Planning