No matter if you are creating a new business, expanding one you already run, contemplating significant changes for your business, needing more financing from a partner or from the bank, trying to get everyone to agree on a plan – or any combination of those factors – you need to establish a written business plan.
No, that isn’t a popular, entertaining option. Your grandfather was probably quite successful with the family farm even without a written business plan, but it is obvious that we are no longer living in olden times. Our world changes rapidly, and that change is the only constant. This world is fiercely competitive and has very low tolerance for mistakes, and you can experience severe consequences for making decisions without a plan. In the business environment of today, there is an incredibly narrow margin between making money and losing it.
Would you sail a boat at night with no rudder or compass? Not having a written business plan is no different. Having a written plan for your business requires you to remove your emotional involvement from your business expenses, helping you to “navigate the waters” as you evaluate whether your service or product will meet an actual need. This written plan also allows you to better communicate your ideas to other people, because you have a defined set of expectations and guidelines for operating your business.
Now that you are paying attention, allow me to give you an outline of the most critical components of any written business plan and how to begin.
What, exactly, is a business plan? Given that a plan in general is any method, program, or scheme defined in advance in order to accomplish specific goals or objectives, a business plan is any document summarizing how an owner, entrepreneur, or manager intends to organize resources and activities in order to achieve success. Simply put, a written business plan is an outline for achieving the objectives of a business venture. This plan gives a timeline and map indicating the current status, future goals, and how to achieve them. As the owner of your agricultural business venture, you need to be involved directly in that process of assessing resources, establishing goals, determining what is necessary, and creating a well-considered plan for action.
At this point, you are probably wondering if there is a general format for such business plans, as well as how much detail you need to include in your plan. With respect to the latter question, the amount of detail in any given business plan will depend on the plan’s purpose. Plans can be simple, with less than ten pages. Many experts agree that, overall, if a plan calls for outside resources such as equity investment or loans, it should be between 25-50 pages long.
To answer the first part of the question, there isn’t a standard format for a business plan, but most plans include the following six main components:
1. Executive Summary: While this is usually the first item in a written business plan, it is typically created last. It has a short description of the mission, goals, and vision of the business and identifies important elements in the business plan (e.g. sales growth, profitability, and strategies).
2. Description Of The Company: In this section, the plan outlines the location, name, and history of the business (including a description of the previous performance if it’s an existing business or the start-up plan for a new business).
3. Marketing Plan: This portion describes the customers to be targeted; details the services or products being offered; analyzes the competitors, advertising, and pricing strategies; makes predictions for sales forecasts; and describes how the product will be packaged and distributed.
4. Operational Plan: In this area, how services or products will be made is described in detail. In particular, there is a focus on the physical resources that are on hand or that will need to be obtained via purchase or lease; the production system(s) that will be used; the capacity and size of the business; and any policies or regulations that will affect production (e.g. zoning, special permits, licensing).
5. Human Resource Plan: This section identifies the business’ organization structure, such as who will manage the business and the number of employees needed in each area, as well as describing how employees will be paid (both in wages and benefits).
6. Financial Plan: Any funding requirements are included in this section, with specific information on projected income statements, break-even analysis, balance sheets, cash flow, and a discussion of various financial indicators.
While no written business plan can guarantee that your will have a successful business, it has been shown that your business is ten times greater to fail without a written plan, and that new companies with a business plan raised double the capital as those that did not have one. Other research indicates that a solid business plan is the most important factor for success in this globally-competitive market. You need to ensure that your agricultural operations have the best road map to get your business where you would like it to go.