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Business Planning for Better Risk Management

2013 Extension Risk Management Education National Conference. Business Planning for Better Risk Management. Winifred W. McGee, Senior Extension Educator Lynn F. Kime, Senior Extension Associate. Why Proactive Farm Management? . Farmers need to look “down the road”

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Business Planning for Better Risk Management

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  1. 2013 Extension Risk Management Education National Conference Business Planning for Better Risk Management Winifred W. McGee, Senior Extension Educator Lynn F. Kime, Senior Extension Associate

  2. Why Proactive Farm Management? Farmers need to look “down the road” • Existence of an expanded marketplace • Contracts • Direct marketing • Global competition • More technology/complexity in production • Increasing impact of regulations • Economic roller coasters

  3. Roles of Farm Business Planning • Putting thoughts in writing • Defines goals and objectives • Defines values and mission • Organizes the research needed • Shares the vision with others • Family/partners • Advisors • Lender

  4. Research Data on Written Plans • 90% of lenders require a written business plan to make a loan. • Farmers and business plans • <20% have written plans • ¼ of those having plans don’t use them • Business plans are essential if you are • Seeking to improve profits and efficiency • attempting to secure financing or equity capital Source: Business Planning Blues Part I, Dr. David M. Kohl. Business and Economy Trends. Ag Choice Farm Credit Website. February 18, 2011.

  5. Many Uses for a Plan • Strategic Planning • Marketing • Expansion • Contingency Planning • Obtain Financing

  6. Plans for Starting to Farm • Establishment of a traditional, or alternative agricultural venture • Identification of • management tasks • financing options • Ensure that daily actions are compatible with long-term personal, environmental, economic, and community values

  7. By looking ahead, pre-venture, Address all five areas of risk: • Market – Level of demand/marketing venues • Financial – Investment needed/potential ROA • Production – Skills/equipment/variables • Human Resource – Involve family/partners • Legal – Licenses & permits/regulations Visualize before action!

  8. Not Just for Start-ups! Experienced producers use written plans to make decisions in a better-informed way: • add value to the existing operation through • product processing -- cooperative marketing • direct sales • explore market options • map out a transition on the farm • incorporate more family members/partners • transfer or sell the business

  9. Plans for Existing Farms Address all five areas of risk: • Market – Direct Sales/Consumer Expectations • Financial – Pro forma Budgets/Insurance • Production – Visualize processes/products • Human Resource – Involve family/advisors • Legal – Licenses & permits/environmental and food safety regulations Retrofitting and enhancing for profitability/ sustainability!

  10. Educational Opportunities Seven Penn State Extension Workshops support agricultural entrepreneurship: • Exploring the Small Farm Dream • Your Future in Focus • Annie’s Project • Food for Profit • Managing Risk for Food Businesses • Farm Sense • Farm Transitions

  11. Objectives of Your Future in Focus • To challenge participants to farm proactively • To draft a written business plan • To establish communication/ networks • Professional service and support • Family & partners • Other owners

  12. Your Future in Focus Business planning, step-by-step • Defining the business mission/vision/values • Setting goals and objectives • Research, resources and tools • Business strategies • Marketing/promotion • Financial management • Financing options • Implementing and updating the plan

  13. Your Future in Focus Features • Peer-reviewed text • Step-by-step plan development • “Case study families” • Real-life sample sections • In-class applications • Guest speakers • Worksheets • Tie to UMN AgPlan on-line tool

  14. Pilot Sessions for the Curriculum • Lancaster – 9 evenings (Jan – Mar 2009) 9 participants • Montrose -- 5 days (Jan – Mar 2009) 7 participants • Gettysburg – 5 days (Jan – Mar 2010) 5 participants

  15. Pilot Project Impacts • 17 of 21 participants completed post-survey • Carry out an entrepreneurial self-assessment • 15 had done so • 1 “not yet” • 1 N/A (decided not to go into business) • Written mission statement • 15 crafted a business mission description • 10 of the 15 had used the mission statement to define their enterprise goals and objectives

  16. Business Planning Steps Reported • Identifying target market • 8 asserted demographics were robust • 2 intended to do the research • 6 not sure about demographics • Identifying applicable regulations • 9 (53%) learned about appropriate rules/standards from class guest speakers

  17. Long-term Impact – Success Stories • Second generation integration • Strack’s Tree Farm • New enterprise development • Ladys’ Center Mills Farm, LLC • Reinventing a farm • Lindenhof Farm, LLC • Mentoring business plan development • Patches Family Creamery

  18. Stracks Tree Farm

  19. Ladys’ Center Mills Farm, LLC

  20. Lindenhof Farm, LLC

  21. Patches Family Creamery

  22. Building an Enterprise Plan • Time investment • Written down • Networking with others • Think things through • PLAN FOR SUCCESS

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