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Financial Planning for Small Businesses. Paul Ellinger [email protected] University of Illinois April 1, 2008. Outline. Background: Illinois Farm Beginnings Overview of FAST Tools Business Plan: Economics of the business FAST Tool: New Company Simulator. Illinois Farm Beginnings .

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Financial Planning for Small Businesses

Paul Ellinger

[email protected]

University of IllinoisApril 1, 2008


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Outline

  • Background: Illinois Farm Beginnings

  • Overview of FAST Tools

  • Business Plan: Economics of the business

  • FAST Tool: New Company Simulator


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Illinois Farm Beginnings

  • Farmer Training Program initiated in Minnesota

  • Illinois Farm Beginnings is facilitated by

    • University of Illinois (Leslie Cooperband),

    • University of Illinois Extension (Deborah Cavanaugh-Grant)

      Two non-profit organizations

    • The Land Connection—Congerville, IL,

    • Angelic Organics CSA Learning Center—Caledonia, IL

  • http://illinoisfarmbeginnings.org/


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Illinois Farm Beginnings

  • 10 sessions in the winter focusing on planning for profit

  • Hands-on Field Days: April to October

  • Mentoring from existing farmers


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Sessions

Session 1 Clarifying values; Setting personal and Strategic Business Goals

Session 2 Building Your Business Plan

Session 3 Whole Farm Business Strategy: Tools and Techniques

Session 4 Financial Planning 101: The Fundamentals

Session 5 Financial Planning 201: Planning for Profit

Session 6 Marketing 101: The Fundamentals

Session 7 Marketing 201: Realities from the Field

Session 8 Connecting with Financial Resources and Farm Business Plan Presentations

Session 9 Connecting with Conservation Resources and Farm Business Plan Presentations

Session 10 Mentor/Mentee Meeting


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Session Outline

  • Understanding the economics of your business

    • Identify the major revenue sources of the business

    • Develop a method to determine the costs of producing/preparing for sale each item

    • Variable costs vs fixed costs

    • Distinguish your one-time costs from ongoing costs

    • Identify vulnerabilities

    • Oops and double oops assumptions

    • Develop a break even price and/or production level

  • Financial statement primer

  • What does your lender want?

  • Tools and information


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FAST Tools

  • farmdoc companion project initiated in 1999

  • Development of spreadsheet-based tools to aid decisions for producers, lenders, consultants and investors

  • Facilitate use, access, distribution of tools and resources through CD and internet distribution

    • Quarterly subscription

    • farmdoc download

    • via workshops

  • Approximately 30,000 CDs produced and another 35,000 downloads

  • Increased demand for education and training


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FAST Tools - Overview

Computerized

Decision Aids

Financial Analysis

Investment

Analysis

Loan Analysis

FarmManagement

Grain Marketing & Management

Risk Management

Yield Database Utilities


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New Company Simulator

  • Key components

    • Five year financial plan

      • Cash Flow: Monthly cash flow to account for seasonality

      • Balance Sheet

      • Income Statement

      • Financial ratios

    • Ability to evaluate 6 alternative crops/enterprises

    • Simultaneously evaluate 3 economic scenarios

    • Break even analysis

    • Solver for initial capital needed under alternative conditions


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FAST Spreadsheets

Demo of program

www.farmdoc.uiuc.edu/fasttools/


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