how to write a business plan and review farm performance

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How to write a business plan and review farm performance

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Description

This publication shows how to build your own comprehensive business plan, step-by-step. Identify strengths and weaknesses. Choose key performance indicators. Lots of worksheets and examples.

Introduction
Chapter 1: Before you start Why prepare a business plan Where does a business plan fit in with your management? What size and scope for your business plan? Who should develop a business plan? Where should a business plan be stored? Wha't in a farm business plan?
Chapter 2: How to write a farm business plan Who will participate in the planning process? Where are we now? Where do we want to be? How do we get there?
Chapter 3: Monitor and review farm business performance Performance indicators - what to measure Monitoring financial performance Indicators of financial performance Farm business records Compare and evaluate Review, revise and adjust plans
Chapter 4: Resources, further information and support Books On-line resources Advice, support and training
Appendix 1: Partial budget
Appendix 2: Gross margin budgets
Appendix 3: Development budget

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How to write a business plan and review farm performance

This publication shows how to build your own comprehensive business plan, step-by-step. Identify strengths and weaknesses. Choose key performance indicators. Lots of worksheets and examples.

Table of contents

Introduction

Chapter 1: Before you start

Why prepare a business plan

Where does a business plan fit in with your management?

What size and scope for your business plan?

Who should develop a business plan?

Where should a business plan be stored?

What's in a farm business plan?

Chapter 2: How to write a farm business plan

Who will participate in the planning process?

Where are we now?

Where do we want to be?

How do we get there?

Chapter 3: Monitor and review farm business performance

Performance indicators - what to measure

Monitoring financial performance

Indicators of financial performance

Farm business records

Compare and evaluate

Review, revise and adjust plans

Chapter 4: Resources, further information and support

On-line resources

Advice, support and training

Appendix 1: Partial budget

Appendix 2: Gross margin budgets

Appendix 3: Development budget

Includes GST and postage within Australia.

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Farm Business Plan Template

Written by Dave Lavinsky

Over the past 20+ years, we have helped over 3,500 farmers create business plans to start and grow their farm businesses. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a farm business plan template step-by-step so you can create your plan today.

Download our Ultimate Farm Business Plan Template here >

What is a Farm Business Plan?

A business plan provides a snapshot of your farm business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Farm

If you’re looking to start a farm business or grow your existing farm business you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your farm business in order to improve your chances of success. Your farm business plan is a living document that should be updated annually as your company grows and changes. It can be used to create a vegetable farm business plan, or a dairy farm, produce farm, fruit farm, agriculture farm and more.

Source of Funding for Farm Businesses

With regards to funding, the main sources of funding for a farm business are personal savings, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a farm business is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan.

Finish Your Business Plan Today!

Your business plan should include 10 sections as follows:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of farm business you are operating and the status; for example, are you a startup, do you have a farm business that you would like to grow, or are you operating a chain of farm businesses.

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the farm business industry. Discuss the type of farm business you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.

Company Analysis

In your company analysis, you will detail the type of farm business you are operating.

For example, you might operate one of the following types among others:

Vegetable Farm : this type of farm grows a wide variety of vegetables (but not grains or soybeans) and melons in open fields and in greenhouses.
Dairy Farm : this type of farm primarily raises cattle for milk. Typically, this type of farm does not process the milk into cheeses or butter, etc.
Fruit Farm : this type of farm primarily grows fruits.
Hay and Crop Farm : More than half of these types of farms grow hay, while a small number grow sugar beets. A variety of other crops, such as hops and herbs, are included in the industry. Some operators also gather agave, spices, tea and maple sap.
Industrial Hemp Farm : this type of farm grows and harvests cannabis plants with a tetrahydrocannabinol (THC) content of less than 0.3% by weight.
Plant & Flower Farm : this type of farm grows nursery plants, such as trees and shrubs; flowering plants, such as foliage plants, cut flowers, flower seeds and ornamentals; and short rotation woody trees, such as Christmas trees and cottonwoods.
Vertical Farming : This type of farm involves growing crops in vertically stacked layers, often using controlled environment agriculture (CEA) technologies. This method dramatically reduces the amount of land space needed for farming and can increase crop yields.

In addition to explaining the type of farm business you operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

When and why did you start the business?
What milestones have you achieved to date? Milestones could include sales goals you’ve reached, acquisition of additional acreage, etc.
Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the farm business.

While this may seem unnecessary, it serves multiple purposes.

First, researching the farm business industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards decaffeinated farm business consumption, it would be helpful to ensure your plan calls for plenty of decaffeinated options.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your farm business plan:

How big is the farm business (in dollars)?
Is the market declining or increasing?
Who are the key competitors in the market?
Who are the key suppliers in the market?
What trends are affecting the industry?
What is the industry’s growth forecast over the next 5 – 10 years?
What is the relevant market size? That is, how big is the potential market for your farm business. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your farm business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: food manufacturers, grocery wholesalers, retail grocers, restaurants, individual consumers, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of farm business you operate. Clearly food manufacturers would want different pricing and product options, and would respond to different marketing promotions than retail grocers.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

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With Growthink’s Ultimate Farm Business Plan Template you can finish your plan in just 8 hours or less!

Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other farm businesses.

Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes processed foods, imported goods, and growing produce themselves. You need to mention such competition to show you understand the true nature of the market.

With regards to direct competition, you want to detail the other farm businesses with which you compete. Most likely, your direct competitors will be farm businesses located very close to your location.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

What types of customers do they serve?
What products do they offer?
What is their pricing (premium, low, etc.)?
What are they good at?
What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

Will you provide superior products?
Will you provide products that your competitors don’t offer?
Will you make it easier or faster for customers to acquire your products?
Will you provide better customer service?
Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a farm business plan, your marketing plan should include the following:

Product : in the product section you should reiterate the type of farm business that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to wholesale crops, will you also offer subscriptions to individuals?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the products you offer and their prices.

Place : Place refers to the location of your farm. Document your location and mention how the location will impact your success. For example, is your farm centrally located near gourmet restaurants and specialty grocers, etc. Discuss how your location might provide a steady stream of customers. Also, if you operate or plan to operate farm stands, detail the locations where the stands will be placed.

Promotions : the final part of your farm business marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

Making your farm stand extra appealing to attract passing customers
Distributing produce samples from the farm stand or at farmers markets
Advertising in local papers and magazines
Reaching out to local bloggers and websites
Local radio advertising
Banner ads at local venues

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your farm business such as serving customers, delivering produce, harvesting, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 1,000th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or acquire more arable land.

Management Team

To demonstrate your farm business’s ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in farming. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in farming and/or successfully running small businesses.

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you serve 100 customers per week or 200? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your farm, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a massive $100,000 supplier contract, that would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for seed, equipment, employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a farm business:

Location build-out including barn construction, land preparation, etc.
Cost of equipment like tractors and attachments, silos, barns, etc.
Cost of nutrients and maintaining machinery
Payroll or salaries paid to staff
Business insurance
Taxes and permits
Legal expenses

Your new farm’s business plan must include a detailed financial plan based on reasonable assumptions of your costs and revenues. To determine if the results you show in this plan will be attractive to investors, look at industry standard financial metrics to see how you measure up against the farming industry, or your sector of the industry, on average. These are some basic measures and ratios to study.

Value of Production

The value of production is equal to your farm’s cash receipts plus the changes in value of product inventory and accounts receivable, less your livestock purchases. This is a measure of the value of the commodities you have produced in the period.

Net Farm Income

The NFI or net farm income, represents the value of production less direct and capital costs in the time period. This is a dollar figure, and not a ratio relating the income to the investment made, so it cannot be used to compare the farm against other farms.

Gross Margin

This represents the NFI less depreciation. The gross margin shows how much money is available in the year to cover the unallocated fixed costs, and dividends to owners and unpaid operators.

Return on Farm Assets

This is a ratio that can be used to compare the farm with others. This is calculated as NFI plus interest expense less unpaid operator labor, all divided by the total assets of the farm.

Asset Turnover Ratio

This ratio is equal to the value or production over the total farm assets. Combined with the operating profit margin ratio, this shows the efficiency of the farm in generating revenues.

Operating Profit Margin Ratio

This ratio is similar to Return on Farm Assets, but divides the same numerator (NFI plus interest expense less unpaid operator labor) by the value of production figure. This shows the percentage of each revenue dollar that becomes profit. If it is low, a higher turnover can compensate, and if it is high, a lower turnover ratio is required.

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your store design blueprint or location lease.

Farm Business Plan Summary

Putting together a business plan for your farm business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. It can be used for a small farm business plan template or any other type of farm. You will really understand the farm business, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful farm business.

Download Our Farm Business Plan PDF

You can download our farm business plan PDF here . This is a small farm business plan example pdf you can use in PDF format.

Farm Business Plan FAQs

What is the easiest way to complete my farm business plan.

Growthink's Ultimate Farm Business Plan Template allows you to quickly and easily complete your Farm Business Plan.

Where Can I Download a Free Farm Business Plan Example PDF?

You can download our farm business plan PDF template here . This is an example business plan template you can use in PDF format.

Don’t you wish there was a faster, easier way to finish your Farm business plan?

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.

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How to write a business plan and review farm performance AgGuide

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This publication shows how to build your own comprehensive business plan, step-by-step. Idenitify strengths and weaknesses. Choose key performance indicators. Lots of worksheets and examples.

Introduction
Chapter 1: Before you start
Why prepare a business plan
Where does a business plan fit in with your management?
What size and scope for your business plan?
Who should develop a business plan?
Where should a business plan be stored?
Wha't in a farm business plan?
Chapter 2: How to write a farm business plan
Who will participate in the planning process?
Where are we now?
Where do we want to be?
How do we get there?
Chapter 3: Monitor and review farm business performance
Performance indicators - what to measure
Monitoring financial performance
Indicators of financial performance
Farm business records
Compare and evaluate
Review, revise and adjust plans
Chapter 4: Resources, further information and support
On-line resources
Advice, support and training
Appendix 1: Partial budget
Appendix 2: Gross margin budgets
Appendix 3: Development budget

Author: Brian Walsh

ISBN: 9780731306282 | 64 pages | A4

Catalogue number: B734

Publisher: NSW Department of Primary Industries | 2010

Choosing a selection results in a full page refresh.
Press the space key then arrow keys to make a selection.

Details of a Small Farm Business Plan

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Writing a farm business plan can be a tool for you to plan your farming business. It can also be a requirement of securing grants and loans for your farm business. The process of writing a farm business plan may seem overwhelming and intimidating at first, but if you break it down into its component steps, it becomes much more manageable.

What Is a Business Plan?

A business plan is a roadmap for your small farm . It is both process and product. During the writing of a farm business plan, you'll develop an overall vision and mission for your business. You will think about your short- and long-term goals. You'll define the steps needed to achieve those goals. You'll set the direction for your business to develop over the next five years.

If you're already an established business, your new business plan will show where you're going next. A good business plan should be:

Mission Statement

Your farm’s mission statement is your overarching purpose for your business:

Why does your farm exist?
What purpose does your farm serve?
Where is your farm headed?

This is beyond “make money.” This mission statement is based on your values and your core identity as a small farm.

The goals in your business plan are the specific, measurable “things” you will achieve with your small farm. Short-term goals are defined as those that you will complete within one year. Long-term goals are those that take longer than one year to complete.

SMART Goals are:

Rewarding, and have a

Background Information

In this section of your business plan, take inventory of what you have right now:

Where are you located?
How many acres of land are you farming?
When did you begin farming?
How are you currently operating?
What general practices do you use for such things as conservation, tillage, environmental impact, and marketing?

Farm Strategy

This is where your business plan gets to looking forward. You are going to formulate your farm strategy from now into the next five years or so.

Gather information and research markets. Make sure that your farm plan fits into the general market in terms of supply and demand. Investigate and analyze industry trends, identify competitors, and define buyers.
SWOT Analysis. This is an analytical tool that can be used in making decisions. SWOT stands for: strengths, weaknesses, opportunities, and threats. As a business, analyze your internal strengths and weaknesses. Then look externally at what opportunities and threats exist - competitors, new markets, government regulations, economic conditions, and so forth.
Create alternative strategies. Looking at the information you've gleaned and the analysis you just did, think through options for your farm strategy. Don't rely on price alone; economies of scale are challenging on the small farm level.
Don't jump to one conclusion immediately. Really spend some time fleshing out the specifics of some of the strategies and looking at their advantages and disadvantages. Try to find options that combine your internal strengths with opportunities in the external environment.
Look at all your strategies, then reread your mission statement. The ideal farm plan will fit your mission best.
Write an implementation plan. This is where you write a plan that will make your new strategy happen.

Marketing Strategy and Plan

In the next part of your farm business plan, you develop and outline a marketing strategy for your products and services. This can build on the research you did in the previous step. For each product, include the price, placement, and promotion ideas. Consider how you will convey real and perceived value to your customers.

Management Summary

This part of your business plan details your farm business’ structure. Everyone who is involved in the management of the business should be listed here. External resources are listed here as well.

Financial Analysis

In this section, you will need to detail the financial aspect of your farming operation. List your current finances in detail, including all income and operating expenses. Referring to your new strategy, you will forecast what is needed for future growth and to meet the goals you have outlined in terms of capital. Include what your future operating expenses will be.

Pulling It All Together

Writing a farm business plan is a big project. Don’t let that put you off. Your plan can be as simple as it needs to be for right now. Begin with your mission statement and goals. Do your homework by analyzing markets and researching competitors and trends. Have fun brainstorming alternative strategies and let them marinate a while. Take it one step at a time.

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12: Business Plans

What is a business plan.

A business plan is a document that helps you to organize and succinctly summarize the vision you have for your business. The plan contains the operational and financial objectives of a business, the detailed plans and budgets showing how the objectives are to be realized.

A good business plan will contain the following:

Your business vision, mission statement, key values, and goals
Description of the product(s) you intend to produce
Strengths, Weaknesses, Opportunities and Threats the business may experience are described
Production plans
Marketing plans
Estimated start-up costs
Information on your legal structure and management team
Current financial statements or projected financial statements.
Resume or brief explanation of your background and relevant experience
Less than 10 total pages so that people actually read it

Helpful Publications for Writing a Business Plan

General Business Resource Publications:

Starting an Ag-Business? A Pre-Planning Guide http://publications.dyson.cornell.edu/outreach/extensionpdf/2004/Cornell_AEM_eb0408.pdf
Business Transfer Guide: Junior Generation http://publications.dyson.cornell.edu/outreach/extensionpdf/2016/Cornell-Dyson-eb1605.pdf
Producing a Business Plan for Value-Added Agriculture http://publications.dyson.cornell.edu/outreach/extensionpdf/2007/Cornell_AEM_eb0708.pdf
Business Planning for the Agriculture Sector: A Guide to Business Plan Development for Start-up to Mid-size Operations http://publications.dyson.cornell.edu/outreach/extensionpdf/2010/Cornell_ pdf
Building a Sustainable Business (Sustainable Agricultural Research Education (SARE)Publications) sare.org/publications/business.htm 280 pages of education and practical exercises to guide you through the financial, management, and interpersonal skills needed to start a successful farm business. Order hard copy for $17 or download PDF online for free.

Cornell Cooperative Extension Publications for Specific Commodities:

Landscape Business Planning Guide http://publications.dyson.cornell.edu/outreach/extensionpdf/2003/Cornell_AEM_eb0313.pdf
Writing a Business Plan: A Guide for Small Premium Wineries http://publications.dyson.cornell.edu/outreach/extensionpdf/2002/Cornell_AEM_eb0206.pdf
Writing a Business Plan: An Example for a Small Premium Winery https://ageconsearch.umn.edu/bitstream/122203/2/Cornell_AEM_eb0207.pdf

Getting Help Writing a Business Plan

Tips for writing your farm business plan

Writing a farm business plan shouldn’t seem like a mountain to climb. You know your business better than anyone else, all it takes is to just make a start. Put pen to paper and scribble down some notes, or add them to the notes app on your phone as you think about them. Putting your ideas or goals for the future down somewhere is all it takes to begin, and eventually you will have the bones to begin putting together your business plan.

A business plan can help you outline the direction of the business and the actions that will help you to achieve it. It can also be used to help secure financing and investment. Unfortunately, business plans aren’t a set and forget kind of thing, and you will need to continue to review and update it on a regular basis, as your business changes and evolves.

Your business plan can be as complex or as simple as you like, adding in as much detail as makes sense for your farm. It can be a one-page document or you can go into great detail and really think about what steps you are going to take, assign some key performance indicators to your goals and develop an extensive strategy for your farm business. Neither options are incorrect, but the intended use of your business plan will help to define how detailed it needs to be.

We have put together some of our top tips on writing a business plan, and some of the things you might need to think about for your business.

Vision and goals – identify your business vision and goals. Ask yourself – “Where do I see myself in 5, 10, 20 years time? Where do I see my business?” Do you want to grow a large farm with multiple enterprises and a large asset base? Or do you want to have a farm business which allows you the flexibility to spend more time with your family? Are you planning on handing the farm over to your children one day in the future? Write down what you want to see for the future of your business, and use that to help define your vision and goals. You could also draw a picture of what your farm will look like. Stick figures acceptable!
Think about your passions – What is it about farming that you are most passionate about? Where do your interests lie? Does your business reflect what you care about the most? Identifying the parts of farming you love can help you reflect on what direction you want your business to go in.
Conduct a SWOT analysis – use a SWOT analysis to help identify where your business’s strengths and weaknesses lie, what are some opportunities to grow and what are some of the threats which could have an effect on your business. Sometimes it can be hard to recognise some of the pitfalls of your business when you are so close to it, or what some of the threats to your business might be. Having conversations about this with other people in the business or members of the family is a good way to identify these.
Keep good financial records – profit statements, cash flow budgets and balance sheets help to analyse the performance of your business, and trading accounts need to be kept accurate.
Use your projected budget to help inform decisions – when putting together a projected budget think of the best, most likely and worst case scenarios which can happen to your business. This gives you a critical way of looking at decisions you make for your farm, and is known as informed decision making.
A marketing strategy or plan doesn’t need to be complicated – what is the product/s you are producing and where are you selling it? A SWOT analysis can help with identifying any gaps or anything that is not working well in your marketing plan.
The business environment doesn’t mean the location of your farm – business environment isn’t referring to geographical environment, it refers to the external factors which have an effect on your business. These are often out of your control, but you need to think critically about how these factors can and will impact on your business.

There are an abundance of templates available online to help you set out your business plan, but they may not work specifically for you. You don’t need to completely stick to a template. Find one which best suits your business and edit it from there. Some suggested topics to include in your business plan are:

Business structure/outline
Vision & goals
People management
Business environment
SWOT analysis
Risk management
Marketing strategy
Financial analysis & projected budgets

Further Information

Business Victoria have a short animation on How to write a business plan

Using a decision tree can help you make a decision that you might be on the fence about.

Thinking about succession planning can help you thinking about succession if your vision and goals have identified that as something to think about for the future

Tips on approaching the bank has some great tips if you are looking to use your business plan to secure finance.

Business Management

April 19th, 2021 at 09:07am

decision making , risk management , succession planning

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Farm business planning

Farm business planning is not just for when the chips are down. It can also be a great tool to set out your vision for your farm, how you plan to reach your goals and drive farm profitability and sustainability.

Farmers face a number of challenges such as seasonal conditions and market volatility and it’s important that a farm business plan supports you to make decisions through these challenging times. A business plan should include worst case scenarios with the hope that they never happen.

Your business plan should also include a timeline for your retirement, family succession or eventual sale of the farm. For long-term planning to result in successful and achievable outcomes, discussions should involve all members of the family who are part of the farm business. There is no point planning for a member of the next generation to take over the farming business if they are not interested in doing so.

Making a farm business plan can be complex and daunting, but there are many highly trained professionals, such as your accountant, solicitor, agricultural consultants, financial advisors, planners to help guide your decisions. It may also be worth talking to trusted friends or neighbours about your plans and see whether they can recommend someone in particular.

A business plan should help minimise stress, however, if you find yourself in a crisis situation don’t avoid making decisions. Reach out for help with personal problems and for business advice and available support services.

Fast facts:

Many farms are a business, and every business needs a plan to set goals and help guide it through good and challenging times.
Seek professional help to develop a sustainable plan for your farm. You may be eligible for assistance from a free financial counsellor.
Don’t despair if you are in a crisis, contact support services for help and advice.

Useful Resources

More information:

Australian Government Department of Agriculture Rural Financial Counselling Service (RFCS)

National Centre for Farmer Health Support Page

Centrelink – Department of Human Services Payments for rural and remote Australians

Department of Primary Industries (NSW) Farm budgets and costs How to write a business plan and review farm performance

Department of Primary Industries, Parks, Water and Environment (Tas) Farm Business Planning Tools

Research & reviews:

Journal of Rural Studies The future of family farming: A literature review on innovative, sustainable and succession-oriented strategies

Canadian Journal of Development Studies Working with stuckness: lessons from an intervention to support intergenerational transitions on Australian dairy farms

Agricultural Sciences Modelling operational decision-making in agriculture

Agronomy for Sustainable Development Processes of adaption in farm decision-making models: a review

Managing Stress on the Farm Book

Available for immediate download or delivery

Privacy Overview

Center for Commercial Agriculture

May 7, 2024

Discussing Key Resources and Risk Exposure in Your Farm Business Plan

by Margaret Lippsmeyer, Michael Langemeier, and Michael Boehlje

Introduction

Developing a business plan for your farm helps align day-to-day operations with overarching business goals. In this article, we explore the importance of assessing current business resources and exposure to risk while creating a business plan. We provide discussion on risks to your business’s key resources, a framework to evaluate the strength of your farm’s resource base, and an outline of how to craft an effective business plan. These topics link back to our previous articles on integrated risk management (Lippsmeyer, Langemeier, and Boehlje, 2024a) and key resources (Lippsmeyer, Langemeier, and Boehlje, 2024b) where we discussed how macroeconomic factors and other external shocks can influence timing and effectiveness of investments in key business resources.

Assessing Resources

Availability and strength of key resources—including financial, physical, human, organizational, and information technology—should shape your business objectives and determine an effective business plan. Business objectives and business plans should focus on strengthening your farm’s key resource base. This resource base acts as a foundation for potential farm expansion, or ability to withstand shocks or stresses in the business environment. Evaluating key resources is a critical initial step in business planning, ensuring you have accurate benchmarks for your business’s resources. These benchmarks help to identify which key resources to leverage and which need to be strengthened.

In the next sections we discuss different types of key resources and major risks associated with each. In addition to this discussion, Figure 1 poses a series of questions which can be used to assess the strength of your farm’s key resources. These questions are intended to pinpoint potential shortcomings in a farm’s resource base, thereby assisting in the development of a business plan that addresses resources needing improvement. Figure 2 illustrates risk exposure by resource category.

Figure 1: Assessing Strength of Business Resources, Adapted from Olsen (2007)

Figure 2: Risk Exposure

Organizational Resources

Organizational resources are the glue which binds together physical, financial, human resources, and information technology, giving direction and meaning to a farming operation. Organizational resources include business reputation, core values, operational structures, and systems, and play a vital role in differentiating your farm from competitors. For example, most operations can effectively produce yellow corn, but consistent product quality, reliable logistics, trustworthy relationships with input suppliers and product distributors are ways in which your organizational resources may yield a competitive advantage. Many risks associated with organizational resources are considered strategic risks. Strategic risks are caused by external shocks or stresses which create a misalignment between a farm’s business strategy and available resources and capabilities (Lippsmeyer, et al., 2023). These risks lack off-the-shelf risk mitigation strategies, making them particularly threatening for businesses. Risks to organizational resources exemplify strategic risk: coming from a variety of sources, are known to cause brand erosion, tarnish reputation, obscure business strategy, and lack effective tools to mitigate these risks.

Adverse weather conditions reducing crop yield is often categorized as a production risk. However, if as a consequence your operation fails to fulfill a sales contract, the risk becomes a strategic risk, impacting your business’s reputation. Although distributors may have alternative sources to compensate for your shortfall, your farm’s reliability in meeting contractual obligations could come under scrutiny. This could adversely affect your future prospects of securing contracts with the same distributor.

Brand erosion and loss of reputation frequently relate to three factors: price, timeliness, and quality. Balancing a competitive price and product quality is a challenge which impacts a farm’s ability to maintain a positive reputation and retain customers. Moreover, perceptions of certain farming practices (i.e., production using certain chemicals or hormone treatments), negative publicity, or increases in competition may also contribute to brand erosion and reputation loss.

The clarity of a business strategy is another component of strategic risk. Business strategy may become compromised due to complexities of relationships between operators, employees, and outside parties; or through attempts to expand to seize economies of scope. For example, business strategy may become unclear during periods of high employee turnover or when a business expands into new market channels. Periods high turbulence, when structure, goals, and values become unclear, are when resilience is most necessary. Operational resilience can serve as a dynamic buffer, enabling quick adaptation to internal and external pressures, and sufficient slack resources to provide leeway while maneuvering through unforeseen challenges (Lippsmeyer and Langemeier, 2023).

Information Technology

Information technology draws parallels between the collection and use of farm data to the concept of ‘surveillance capital’ used to enhance social media platforms (Lippsmeyer, Langemeier, and Boehlje, 2024b). In the context of production agriculture, information technology provides data-driven insights, helping producers identify operational inefficiencies, and assisting in on farm decision-making. The effectiveness of this resource is highly dependent on data collection, organization, and ability to accurately analyze the data and draw correct interpretations.

A common risk associated with information technology is data security. Whether it is financial data collected by a lender, input supplier data, or your farm production data, there are significant concerns about how to protect data from being stolen or accessed without permission. Strategies to limit data accessibility include user authentication to ensure only authorized users can access your farm records, data encryption for sending sensitive information, and access control limits to restrict who can view, modify, or delete data. In the age of increasing data collection and use, it is critical to read and fully understand contracts with equipment or information technology companies prior to signing away rights, and subsequently, knowing how to revoke access if necessary.

Risks relating to information technology span beyond data security. Often even if data collection and storage is done in a secure manner, there remain difficulties or limitations associated with data processing. This poses potential issues of uninformed or ill-informed farm decisions if incorrect conclusions are drawn from analysis, despite best efforts to use data driven insights.

Financial Resources

Financial resources include cash, investments, equity, and receivables, all of which provide liquidity to fund business expenses and updates to physical resources. Sufficient financial resources ensure farming operations can pursue new opportunities when they arise and have ability to weather through unexpected periods of high input costs or low market prices. Risks to financial resources include limited access to debt or equity capital and insufficient liquidity. Without the availability of financial resources, the ability to grow or seize new opportunities is significantly constrained, if not entirely unfeasible.

Physical Resources

Physical resources include land, machinery, buildings, and inventories. These assets are characterized by significant initial investment, continual need for maintenance, and a lack of liquidity relative to financial resources. Assessments of physical resources may vary based on the type of farming operation and the type of resource but generally take into account the resource’s useful life, initial level of investment, quality of maintenance, and salvage value. For example, maintaining land resources may involve soil testing, use of fertilizers to improve nutrient content, or use of cover crops to prevent erosion. While other physical resources like planters and combines need much more frequent maintenance and replacement after exhaustion of their useful life.

One of the major risks related to physical resources is inefficient use (i.e., low utilization rates). Inefficient use of machinery or storage facilities results in higher than necessary production costs. However, inefficient use may be justified in some scenarios. While inefficient use of physical resources is undesirable in the long run, for an operation that plans to grow, having some degree of slack may increase flexibility.

Other risks include improper care and overuse of a resource. These risks are often attributed to poor management or lack of investment due to ownership structure – for example, producers who rent versus own machinery or farm ground are typically more hesitant to make major investments because there is no guarantee they will reap the future benefit from the investment.

Inventories are the final physical resource we will address. Inventories, particularly stored crops, present unique risks including contamination with aflatoxin, insect infestation, or fire in storage bins from inadequate drying procedures. Inventories are the most liquid physical resource for farming operations, typically being sold within one year of harvest, and often used to supplement financial resources.

Human Resources

There are two varieties of human resources we will discuss: those internal to an operation and those which are external. Internal human resources include employees, management, company owners, as well as the relationships, knowledge, and competencies of each. These resources have extensive operational and industry knowledge which is built through time. Prior research shows experience displays positive relationships with profitability and financial efficiency (Vanhuyse, Bailey, and Tranter, 2021). Lippsmeyer, Langemeier, and Boehlje (2024b), discuss the importance of human resources and provide strategies for how to attract and retain quality employees. Risks relating to internal human resources include talent shortages, insufficient workforce, employee retention, and lack of experience. Losing employees incurs significant operational costs, both directly (due to insufficient labor availability) and indirectly (due to loss of tacit operational knowledge) (Spender and Grant, 1996).

External human resources include customer relations, interactions with and knowledge of suppliers. These relationships are more challenging to control due to their indirect connection with a business, yet remain critical for success. Risks relating to customer relations include losses of long-term customers and related market opportunities. Often these risks are closely related to product quality, pricing, and timeliness, as well as organizational resources. If customers perceive you as an unreliable supplier, relationships will deteriorate quickly. Maintaining consistent product quality, efficient logistics, knowledgeable employees, and quality service are all strategies businesses use to encourage longevity of reliable customer relationships (Claycomb and Martin, 2001).

Supplier risks include untimely deliveries, varying quality of inputs, and excessive or unexpected costs. These factors have the potential to influence quality or price of a product, potentially reflecting poorly on your business. Careful and frequent evaluation is necessary to decide which suppliers to continue doing business with, how to set and maintain input standards, and strategies to reward suppliers for desirable behaviors.

Setting Business Objectives

Obtainable business objectives are a critical part of every good farm business plan, so a direct path can be plotted from current performance levels to improved performance where objectives are met. Objectives may vary by enterprise, but likely revolve around improving quality standards, profitability metrics, and timeliness.

Objectives may include achieving specific quality benchmarks for products, retaining a specific proportion of contract agreements from year to year, ensuring a given percentage of deliveries are completed on time, or having management take part in strategy, business, or leadership improvement workshops. Objectives relating to information technology include learning to collect and store yield data, or developing systems to analyze the impact of different inputs on crop health. Objectives for financial resources include achieving specific financial ratio benchmarks, paying off high-interest lines of credit, or saving to invest in a new piece of machinery. Objectives to enhance and maintain human resources might involve hiring additional staff, offering career development opportunities, or offering incentives for loyal customers.

Developing A Business Plan

Using Figure 1, we encourage you to evaluate each of your farm’s key resources to help pinpoint any weaknesses in your resource base and subsequently identify areas in your operation needing improvement. Business plans should begin by identifying strengths or weaknesses of current resources, assessing the implications of relative strengths (or weaknesses) in achieving business objectives, and then focus on setting up step by step plans to achieve those objectives.

Once your business plan has been created, considerations also need to be made for the timing of major organizational changes or substantial investments. Both external shocks (e.g., macroeconomic uncertainties) and available operational slack must be considered to identify optimal timing to improve your resource base (Lippsmeyer, Langemeier, and Boehlje, 2024b).

In order to identify actions effective in making change, regular evaluations with consistent standards must be used to assess resource strength and progress made towards achieving objectives. Continually assessing strengths and weaknesses of key resources and identifying potential improvements can prevent businesses from developing a ‘needs-based strategy’ which waits for major issues to arise, then scrambles to control damage.

Conclusions

This article has provided a discussion of key resources and risks associated with each. By considering the strengths and weaknesses of your resource base, combined with the appropriate timing for investments, you will be better equipped to develop an effective business plan. Using the tools provided in this article, we prompt you to critically assess your farm’s key resources and develop a business plan which progresses from your current resource base to achieving business objectives.

Claycomb, C. and C.L. Martin, C. L. (2001). “Building Customer Relationships: An Inventory of Service Providers’ Objectives and Practices.” Marketing Intelligence & Planning, 19 (6). doi: https://doi.org/10.1108/EUM0000000006109

Lippsmeyer, M. and M. Langemeier. (2023). “ Agility and Absorption Capacity .” Center for Commercial Agriculture, Department of Agricultural Economics, Purdue University, April 20.

Lippsmeyer, M., M. Langemeier, J. Mintert, and N. Thompson. (2023). “ Resilience to Strategic Risk .” Center for Commercial Agriculture, Department of Agricultural Economics, Purdue University, June 20.

Lippsmeyer, M., M. Langemeier, and M. Boehlje. (2024a). “ Integrated Risk Management: Developing an Asset-Based Business Strategy .” Center for Commercial Agriculture, Department of Agricultural Economics, Purdue University, March 15.

Lippsmeyer, M., M. Langemeier, and M. Boehlje. (2024b). “ Key Resources Determining the Future of the Farm .” Center for Commercial Agriculture, Department of Agricultural Economics, Purdue University, April 4.

Olsen, E. (2007). Assessing Your Business and Its Capabilities. In Strategic Planning for Dummies (pp. 121-140). Indianapolis: Wiley Publishing, Inc.

Spender, J., and R. Grand, R. (1996). Knowledge and the Firm: Overview. Strategic Management. doi: https://doi.org/10.1002/smj.4250171103

Vanhuyse, F., A. Bailey, and R. Tranter. (2021). “Management Practices and the Financial Performance of Farms.” Agricultural Finance Review, 81(3) . doi: https://doi.org/10.1108/AFR-08-2020-0126

risk , strategic risk

TEAM LINKS:

Margaret Lippsmeyer

Michael Boehlje

Michael Langemeier

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Margaret Lippsmeyer, Michael Langemeier, James Mintert, and Nathan Thompson segment U.S. farms by farm resilience, management practices, and producer sentiment. This paper was presented at the Southern Agricultural Economics Meeting in Atlanta, Georgia in February.

Key Resources Determining the Future of the Farm: Human Capital & Information Technology

This article emphasizes the significance of human resources and information technology (the ability to manage and analyze data) as we transition into a new era of production agriculture. This new era brings further innovation of agricultural technology, information processing, and use of artificial intelligence to digitize agriculture.

Integrated Risk Management: Developing an Asset-Based Business Strategy

Integrated risk management is a comprehensive approach that addresses business, financial, and strategic risks collectively, safeguarding your organization against potential threats. This article analyzes the importance of integrated risk management for production agriculture, an industry which is highly susceptible to external shocks.

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(Part 1) Indiana Farmland Values 2023 Update

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss Indiana farmland values on this, the first of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results. Each June, the department of agricultural economics surveys knowledgeable professionals regarding Indiana’s farmland and cash rental market.

Discussing Key Resources and Risk Exposure in Your Farm Business Plan

Margaret Lippsmeyer, Michael Langemeier , and Michael Boehlje
Center for Commercial Agriculture
Purdue University

Introduction

Assessing Resources

Figure 1. Assessing Strength of Business Resources

Adapted from Olsen (2007)

Organizational Resources

Many risks associated with organizational resources are considered strategic risks. Strategic risks are caused by external shocks or stresses which create a misalignment between a farm’s business strategy and available resources and capabilities (Lippsmeyer, et al., 2023). These risks lack off-the-shelf risk mitigation strategies, making them particularly threatening for businesses. Risks to organizational resources exemplify strategic risk: coming from a variety of sources, are known to cause brand erosion, tarnish reputation, obscure business strategy, and lack effective tools to mitigate these risks.

Information Technology

Financial Resources

Physical Resources

Human Resources

Setting Business Objectives

Developing A Business Plan

Conclusions

Claycomb, C. and C.L. Martin, C. L. (2001). “Building Customer Relationships: An Inventory of Service Providers' Objectives and Practices.” Marketing Intelligence & Planning, 19 (6). https://doi.org/10.1108/EUM0000000006109

Lippsmeyer, M. and M. Langemeier. (2023). “ Agility and Absorption Capacity .” farmdoc daily (13):75, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 24.

Lippsmeyer, M., M. Langemeier, J. Mintert, and N. Thompson. (2023). “ Resilience to Strategic Risk .” farmdoc daily (13):115, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 23.

Lippsmeyer, M., M. Langemeier, and M. Boehlje. (2024a). “ Integrated Risk Management: Developing an Asset-Based Business Strategy .” farmdoc daily (14):54, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 18.

Lippsmeyer, M., M. Langemeier, and M. Boehlje. (2024b). “ Key Resources Determining the Future of the Farm .” farmdoc daily (14):60, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 27.

Olsen, E. (2007). Assessing Your Business and Its Capabilities. In Strategic Planning for Dummies (pp. 121-140). Indianapolis: Wiley Publishing, Inc.

Spender, J., and R. Grand, R. (1996). Knowledge and the Firm: Overview. Strategic Management. https://doi.org/10.1002/smj.4250171103

Vanhuyse, F., A. Bailey, and R. Tranter. (2021). "Management Practices and the Financial Performance of Farms." Agricultural Finance Review, 81(3) . https://doi.org/10.1108/AFR-08-2020-0126

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How to Write a Business Plan and Review Farm Performance

Agguide – business series.

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Publisher Description

Even when the weather is fine and seas are calm, good sailors don’t relax completely. They make sure their boat is on course and in good shape, and they constantly watch for any changes in the weather. It’s the same in farming. A successful farm business plans its direction, keeps its eye on the farm’s performance and watches for any changes that might be ahead. When the going gets tough, and even when it’s not, successful farm managers review their business plans, watch their production, marketing and finances closely and make any adjustments needed to keep the business on track. That’s what this book is about. It shows how to write a business plan step by step, how to monitor the performance of the farm business and how to decide if changes are needed to keep the business on track. A business plan is a great tool for any farm. It helps owners, managers and other stakeholders to develop a shared vision for the future and adopt a strategic approach to achieving that vision. A well prepared plan can help to keep the farm business viable, profitable and satisfying for those involved. Table of Contents Introduction Chapter 1: Before you start Why prepare a business plan Where does a business plan fit in with your management? What size and scope for your business plan? Who should develop a business plan? Where should a business plan be stored? Wha't in a farm business plan? Chapter 2: How to write a farm business plan Who will participate in the planning process? Where are we now? Where do we want to be? How do we get there? Chapter 3: Monitor and review farm business performance Performance indicators - what to measure Monitoring financial performance Indicators of financial performance Farm business records Compare and evaluate Review, revise and adjust plans Chapter 4: Resources, further information and support Books On-line resources Advice, support and training Appendix 1: Partial budget Appendix 2: Gross margin budgets Appendix 3: Development budget

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Well, it could be an exciting venture filled with the joy of nurturing a flock and great opportunities!

But before that, you’ll need to manage your finances carefully and understand the fundamental aspects of your poultry farm’s profit & loss potential. So, it’s crucial to have a strong financial plan in place.

If you need help writing one, don’t worry; we’ll guide you!

Explore this sample poultry farm financial plan that will provide valuable insights into the intricacies of financial planning and help you get started.

Key Takeaways

The income statement, balance sheet, cash flow projection, and break-even analysis are the primary elements of a poultry financial plan.
Enhance the accuracy of your plan by exploring the methods of test assumptions and scenario analysis.
Make reliable financial projections with thorough industry research, clear market understanding, and realistic assumptions.
Be practical and conservative about your revenue forecasts and cash flows to grab investors’ attention.
Preparing a financial plan for your poultry farm is much easier and faster when you use a modern financial planning tool.

Poultry Farming Financial Outlook

Before diving right into the financial planning, let’s first explore the recent highlights of the poultry farm industry:

The global poultry market is expected to gain a significant milestone, exhibiting an estimated value of $375.41 billion by 2030 with a CAGR of 3.5%.
In the United States, the poultry industry boasts a robust market size, with a total of 15.9 billion fresh meat sales and around 5.74 billion pounds of turkey production.
Due to growing consumer demand, the chicken & turkey meat production industry in the United States reached a whooping value of $59.1 billion in 2023.
Hormel Foods Inc. is the leading meat and poultry processing company in the United States, and it reported an impressive net revenue of $12.5 billion.

Overall, this outlook presents lucrative opportunities for new poultry farmers with the increasing demand for eggs and meat consumption in both domestic and international markets.

Now, let’s understand how to draft a strong financial plan for a chicken egg farm.

How to Prepare a Poultry Financial Plan

Calculate business startup costs
Determine financing requirements & strategy
Understand your business model
Identify revenue streams
Market analysis and pre-assumptions
Make financial projections
Test assumptions and scenario analysis
Monitor and update your plan

1. Calculate Business Startup Costs

Once you’ve decided to start your poultry farming business , it’s very crucial to have a clear understanding of your finances, right? So, you’ll need to estimate the startup costs very first!

You may start by identifying all the initial expenses associated with your poultry farm. It includes land acquisition charges or rent, poultry house construction, equipment & machinery purchases, procurement of poultry stock or chicks, labor expenses, business insurance & licensing fees, marketing, and operational costs.

You can also research local market conditions and industry benchmarks to evaluate the typical costs of opening a poultry farm. This will help you get accurate estimates.

Try to be clear and comprise every potential cost, no matter how small it is. You can make a specific list of all the expenses, as shown in the below table:

So, having an accurate idea of startup costs will help you create a proper budget and determine the necessary capital to launch your business successfully.

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2. Determine Financing Requirements & Strategy

Sometimes, people don’t have enough money to start their own business. So, they might need to ask for help from others to get the initial investment.

For poultry farming, you must evaluate the current monetary position and determine how much startup capital you’ll require to fund your business. Also, assess various financing options and develop a clear strategy to secure funding.

Here are a few funding options you may consider:

Traditional bank loans
Small Business Administration (SBA) loans
Private investors
Partnerships
Crowdfunding

For each option, you have to evaluate the terms, interest rates, and repayment methods. This will let you devise a financing strategy that aligns with your investment goals and risk tolerance.

Then, you can decide which funding option is the most appropriate for your poultry business.

Furthermore, while seeking credit from banks or investors, you’ll need a professional document that projects how your poultry financial modeling works. It will assist potential lenders to have a better idea of your farm.

3. Understand Your Business Model

Developing a scalable business model is a crucial aspect of a financial plan. This is something you have to decide before you start running your business.

It is a strategic framework that defines how you generate income, manage expenses, and reach your financial objectives.

Here is a list of different types of business models for poultry farming:

Breeder farms
Broiler farms
Dual-purpose farms(for both meat and egg production)
Pullet farms
Specialty poultry

While deciding on any of the above models, you’ll need to understand their financial considerations, including revenue potential, initial investments, profitability, and operational expenses.

This will help you make well-informed decisions and achieve your financial goals in the long run.

4. Identify Revenue Streams

Identifying your business revenue streams is an essential part of maximizing profitability. So, try to diversify your income sources within the poultry farming market and create a robust portfolio.

It will help potential investors or lenders determine how much revenue your poultry farm intends to generate over the next few years.

For instance, you may include the following revenue streams in your poultry financial projections:

Sales of poultry meat
Sales of eggs
Sales of feathers and manure
Processed poultry products
Specialty breeds

In addition to that, consider including other earnings options such as direct-to-consumer sales, agritourism activities, or consulting services to increase revenue potential and diversify income sources.

Well, using Upmetrics could be a great help here. It will not just calculate financial projections but also help you identify relevant revenue streams.

For better understanding, you may consider the following example prepared using Upmetrics:

revenue streams for poultry farming financial plan

Furthermore, it allows you to make informed decisions about your revenue by using different ways to forecast income streams, such as unit sales, the charge per service, recurring/hourly charges, or fixed amounts.

So, this can be an effective and accurate way of estimating your income potential.

5. Market Analysis and Pre-Assumptions

A successful business requires a comprehensive market analysis to gain valuable insights into the local business landscape.

While crafting a poultry farming business plan , you’ve already conducted thorough market research and gained a good idea of the target market, customer demographics, industry trends, regulatory requirements, and other poultry producers.

So, it’s time to use that knowledge to prepare a financial forecast and make realistic assumptions about poultry product prices, feed costs, veterinary care & medication budget, wage rates, and housing maintenance.

Here are a few key components that you should include in your plan:

Pricing Strategy

When it comes to devising a pricing strategy, there’s no bound law. Yet, you’ll need to analyze a few factors, such as your poultry products & services, seasonal demand, production costs, quality standards, and consumer preferences, to develop optimal pricing.

You may conduct a competitive market analysis to comprehend the prevailing market prices and set competitive yet profitable sales prices for your poultry products.

Remember, your prices should reflect the value of your poultry farm and still help you generate sufficient returns on your investment.

Sales Forecast

A sales forecast is a primary element of any business, serving as the cornerstone for its profitability and growth.

It helps you estimate the future sales volume and revenues for poultry products within a specific time frame based on pricing strategy, seasonal variations, promotional activities, dietary trends, and consumer preferences.

You can also analyze historical sales data and industry trends to review past sales performance and seasonal patterns while forecasting future target market demands.

Business Expenses

Generally, business expenses are operating costs or day-to-day expenses that will keep your business running smoothly.

For your chicken farm, you have to conduct a thorough analysis of your anticipated expenses, such as poultry housing facilities, equipment, infrastructure, feed & nutrition, labor costs, veterinary care, utilities, transportation, marketing, and administrative expenses.

Not only that, but you should also consider a few factors, like market trends, feed prices, medication rates, and industry standards while estimating your poultry expenses.

Here, you should note one thing—you must account for probable cost overruns or unexpected expenses during business operations. So, be conservative in your financial projections.

6. Make Financial Projections

If you want to attract investors, let the numbers do the talking. This is so because potential investors or stakeholders will look at the financial reports once and decide whether or not to invest in your business.

So, ensure that your key financial reports provide a clear picture of your poultry farm’s financial health and viability.

Here’s a list of several financial statements and analyzes you should incorporate into your projections:

Cash flow statement

A cash flow statement provides a detailed explanation of how much cash your business brings in, pays out, and ends with the cash balance. Typically, it’s an illustration of how well your business is generating cash.

It helps you track the cash flow in and out of your poultry farm over a specific timeframe, generally monthly, quarterly, or annually.

You may take into account the cash flows related to poultry sales, expenses, investments, loan repayments, or borrowing.

Be realistic about your financial assumptions and measure your business’s liquidity, capability to meet financial obligations, and sufficiency of cash flow to fund future investments and expense outlays.

Balance sheet

A balance sheet provides a quick overview of your business’s financial position at a specific time.

It clearly demonstrates what you own, what you owe to vendors or other debtors, and what’s left over for you. After all, it has three main elements:

Assets: Cash, poultry inventory, equipment, and accounts receivable
Liabilities: Debts, loan repayments, and accounts payable
Equity: Owners’ equity & other investments, stock proceeds, and retained earnings

Ideally, it is formulated as, assets = liabilities + equity

By looking at your balance sheet, anyone can get the exact idea of how financially stable your business is, how much cash you hold, and where your money is tied up.

Income statement

The income statement is also known as a profit and loss statement(P&L), explaining how your business made a profit or incurred a loss over a specific period, typically monthly, quarterly, or annually.

Depending on the structure and type of your business, consider adding these factors—revenue or sales, operating expenses, and gross margin to your profit and loss statement.

You may calculate the gross margin by subtracting the cost of sales or COGS from revenue. It enables you to determine your business’s efficiency in utilizing resources.

Further, the P&L statement should also include operating income, which is equivalent to EBITDA. And the net income is the ultimate goal of any business, found at the end by deducting the operational expenses from EBITDA.

Overall, the income statement helps you gauge your business’s profitability, financial performance, and feasibility in the long run.

Break-even Analysis

The break-even analysis allows you to determine the point at which your poultry farm’s total revenue matches its total expenses, causing no profit or loss.

It helps you evaluate the minimum level of poultry sales or revenue needed to cover its fixed and variable costs.

This analysis provides valuable insights into your financial sustainability and helps you set sales targets, pricing strategies, and cost-contro l criteria.

What is the average break-even period for a poultry farm?

Typically, the average break-even period for a poultry farm can range anywhere from 1 to 3 years, depending on a few factors such as location, initial investment, market demand, pricing for poultry products, production efficiency, feed prices & availability, equipment used, transportation costs, and operational scale.

7. Test Assumptions and Scenario Analysis

As your entire plan is prepared based on assumptions, you’ll need to regularly review and stress-test your financial projections to check their relevance with market realities and business performance.

In this stage, you may consider various “what-if” situations and think about scenarios where things go well or don’t.

For instance, you’ll need to consider the changes in feed prices, disease outbreaks, market fluctuations, or regulatory shifts to measure the stability of your chicken farm financial plan.

By performing test assumptions and sensitivity analysis, you can adjust your strategies accordingly to mitigate risks, optimize returns, and make well-informed business decisions.

8. Monitor and Update Your Plan

Once your plan is ready, continuously evaluate and monitor your poultry farm’s financial performance closely against the financial projections and key performance indicators(KPIs).

You can compare the actual financial results with the projected income streams, expenses, and ROI to take note of any variances or deviations from the plan.

If some factors are remarkably different from projections, recognize the causes behind them. This will help you understand which areas need improvement and which works as anticipated.

Also, review and update your strategies accordingly to optimize financial results and achieve long-term success.

Now that you know how to create a solid poultry farm financial plan, it’s time to explore an example for easy understanding.

Poultry Financial Plan Example

Drafting a poultry financial plan from scratch can be overwhelming, right? But not to worry; we’re here to help you with a realistic financial plan example prepared using Upmetrics.

It includes all the key elements of poultry’s financial projection, including the income statement, balance sheet, cash flow statement, and break-even point. This will simplify the entire planning process and help you get started.

Start Preparing Your Poultry Farm Financial Plan

And that’s a wrap. We’ve discussed all the fundamental aspects of financial planning. So, use that knowledge to finish your small business financial plan .

Still, feeling like a tough job? Don’t worry; we have an easy way for you!

Upmetrics will help you build comprehensive yet investment-ready plans in minutes using its AI Assistance and financial forecasting features.

You’ll have to simply input your financial assumptions and let it figure out the rest!

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

Frequently Asked Questions

What are some financial tools i can use.

Poultry farmers can use various financial tools and software, including accounting platforms, modern financial forecasting software , farm management systems, Microsoft Excel, or Google Sheets to manage their finances carefully.

How often should I review my poultry financial plan?

It’s advisable to review your poultry financial plan regularly, at least quarterly or annually. However, it may require more frequent updates whenever there are significant changes in the business operations, financial conditions, and regulatory requirements.

What financial metrics should I track for my chicken farm?

As a chicken farm owner, you should track several financial metrics, including

Average daily gains
Feed conversion ratio
Feed intake per bird per day
Hatching eggs set per week
Number of eggs produced
Net profit margin
Cost of Goods Sold (COGS)

How long should a poultry farm’s financial projection be?

The financial projections for a poultry farm should cover a period of 3 to 5 years, as this time frame allows for a more comprehensive view of your farm’s financial performance and assists you in long-term planning.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to write a business plan and review farm performance
Description. This publication shows how to build your own comprehensive business plan, step-by-step. Identify strengths and weaknesses. Choose key performance indicators. Lots of worksheets and examples.
How to write a business plan and review farm performance
A successful farm business plans its direction, keeps its eye on the farm's performance and watches for any changes that might be ahead. When the going gets tough, and even when it's not, successful farm managers review their business plans, watch their production, marketing and finances closely and make any adjustments needed to keep the ...
How to write a business plan and review farm performance: AgGuide
How to write a business plan and review farm performance: AgGuide Business Series - Ebook written by Brian Walsh. Read this book using Google Play Books app on your PC, android, iOS devices. Download for offline reading, highlight, bookmark or take notes while you read How to write a business plan and review farm performance: AgGuide Business Series.
How to write a business plan and review farm performance
Chapter 3: Monitor and review farm business performance. Performance indicators - what to measure. Monitoring financial performance. Indicators of financial performance. Farm business records. Compare and evaluate. Review, revise and adjust plans. Chapter 4: Resources, further information and support. Books.
PDF Writing a Farm Business Plan Introduction
Writing a Farm Business Plan Introduction Writing a business plan for your farm can be an intimidating process to start, but it doesn't have to be overly complicated, depending on the main purpose of the business plan. Simply put, a business plan tells what your farm vision is and how you will make it happen. The goal of this Business Farm ...
How to Write a Business Plan and Review Farm Performance
Reviews aren't verified, but Google checks for and removes fake content when it's identified "[This book] shows how to write a business plan, how to monitor the performance of the farm business and how to decide if changes are needed to keep the business on track" --Introduction.
Farm Business Plan Template & How-To Guide [Updated 2024]
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the farm business industry. Discuss the type of farm business you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan.
How to Write a Business Plan and Review Farm Performance
Even when the weather is fine and seas are calm, good sailors don't relax completely. They make sure their boat is on course and in good shape, and they constantly watch for any changes in the weather. It's the same in farming. A successful farm business plans its direction, keeps its eye on the far…
How to write a business plan and review farm performance AgGuide
This publication shows how to build your own comprehensive business plan, step-by-step. Idenitify strengths and weaknesses. Choose key performance indicators. Lots of worksheets and examples. Contents Introduction Chapter 1: Before you start Why prepare a business plan Where does a business plan fit in with your manage
How to Write a Small Farm Business Plan
Don't let that put you off. Your plan can be as simple as it needs to be for right now. Begin with your mission statement and goals. Do your homework by analyzing markets and researching ...
PDF My Farm Business Plan
My Farm Business Plan. 2. Farm business planning resources and information. The following resources and information will support you with farm business planning. Farm Fitness Checklist. The Farm Fitness Checklist helps farmers assess where their business is at currently, and to identify areas and opportunities to strengthen their farm business.
12: Business Plans
The plan contains the operational and financial objectives of a business, the detailed plans and budgets showing how the objectives are to be realized. A good business plan will contain the following: Your business vision, mission statement, key values, and goals. Description of the product (s) you intend to produce.
AgGuide
A successful farm business plans its direction, keeps its eye on the farm's performance and watches for any changes that might be ahead. This book shows how to write a business plan, how to monitor the performance of the farm business and how to decide if changes are needed to keep the business on track. A business plan is a great tool for any ...
Your approach to a farm business plan? Implement, review, and repeat
Farm advisors typically recommend business plans and operating plans be refreshed annually, with the strategic plan or vision moving three to five years out from each annual plan. "Business planning should not be a practice you do once," says De Groot. "It should be a continual process that evolves over time.
Write a Business Plan and Review Performance
A how to guide for farmers. This is a eBook put together by the NSW DPI. It covers the following: how to write a farm business plan; monitor and review farm business performance
Tips for writing your farm business plan
Writing a farm business plan shouldn't seem like a mountain to climb. You know your business better than anyone else, all it takes is to just make a start. Put pen to paper and scribble down some notes, or add them to the notes app on your phone as you think about them. Putting your ideas or goals for the future down somewhere is all it takes ...
Summer Series: A practical guide to writing your farm business plan
A written business plan is a key tool that sets your farm business up for success. While the necessary components vary from business to business, here are eight sections that most farm business plan templates include: 1. Executive summary. A concise summary of the key points of the business venture and the purpose of the plan.
Farm business planning
Farm budgets and costs How to write a business plan and review farm performance. Department of Primary Industries, Parks, Water and Environment (Tas) Farm Business Planning Tools. Research & reviews: Journal of Rural Studies The future of family farming: A literature review on innovative, sustainable and succession-oriented strategies
PDF Farm business plan guide
That's why it's essential that you regularly review and update your business plan - at least annually. Farm Business Plan Guide. Where are you now. 1.Business Purpose. Start your business plan with a brief summary of why the business exists, how it's organised, and what the owners expect from it. This can cover:
Discussing Key Resources and Risk Exposure in Your Farm Business Plan
Developing a business plan for your farm helps align day-to-day operations with overarching business goals. In this article, we explore the importance of assessing current business resources and exposure to risk while creating a business plan. We provide discussion on risks to your business's key resources, a framework to evaluate the strength of your farm's resource base, and an outline ...
Discussing Key Resources and Risk Exposure in Your Farm Business Plan
Obtainable business objectives are a critical part of every good farm business plan, so a direct path can be plotted from current performance levels to improved performance where objectives are met. Objectives may vary by enterprise, but likely revolve around improving quality standards, profitability metrics, and timeliness.
How to Write a Business Plan and Review Farm Performance
A successful farm business plans its direction, keeps its eye on the farm's performance and watches for any changes that might be ahead. When the going gets tough, and even when it's not, successful farm managers review their business plans, watch their production, marketing and finances closely and make any adjustments needed to keep the ...
Write a Business Plan and Review Performance
A how to guide for farmers. This is a eBook put together by the NSW DPI. It covers the following: how to write a farm business plan; monitor and review farm business performance
How to build an effective farm employee review system
Specific categories of the review should encourage a focus on outcomes that will improve the farm's bottom line. An employee review should be based on objective measures rather than subjective topics. Revising the model and offering a new concept, the form can be rated based on actual results, i.e.: achievements, hours, events, etc.
How to Prepare a Financial Plan for a Poultry Farm?
You can also analyze historical sales data and industry trends to review past sales performance and seasonal patterns while forecasting future target market demands. Business Expenses Generally, business expenses are operating costs or day-to-day expenses that will keep your business running smoothly.
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The Online Writing Lab at Purdue University houses writing resources and instructional material, and we provide these as a free service of the Writing Lab at Purdue. Students, members of the community, and users worldwide will find information to assist with many writing projects. Teachers and trainers may use this material for in-class and out ...
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