Farm Management Canada Feature Resource:
Farm Business Planning: Understanding, Preparing & Using
This resource will stimulate better business planning by ranchers and farm managers whether they prepare the plans themselves or with the assistance of advisors. All the elements of a business plan are described in a simple way to enable you to create a plan for your business; these elements include the business profile, the operational plan, the marketing plan, the human resources plan and the financial plan.
Although it may be the last thing you feel like doing, farm business planning can really benefit a farm. Now a farm planning consultant offers some tips to make the process easier and more successful for you.
“You can pay yourself more per hour for doing business planning tasks than for any other task on the farm, in terms of the benefit to your farm’s bottom line in the long run and even in the short term,” says Harris Ivens. “And business planning can go beyond meeting your financial goals. It can also help ensure the farm business is meeting your quality-of-life goals and your long-term vision for the farm, as well as social and environmental goals around how the farm operates within the community and its environmental region.”
Ivens is a consultant, teacher and workshop facilitator with a lot of experience in farm business planning training. He says, “Farm business planning boils down to creating a roadmap for your business so you have something to direct your decision making process. You can always modify your route, but you have an overall guide.”
He adds, “Business planning is a really nice complement to intuition. I don’t feel it’s just one or the other, either business planning or sort of flying-by-the-seat-of-your-pants intuitive decisions. I think it’s always a combination of the two. Business planning can provide some important contrasts when you’re trying to make a decision in the heat of the moment where emotions might pull things in the wrong direction.”
Tailoring the process to your needs
In general terms, a farm business plan identifies the objectives for the farm business and how to move forward to achieve those objectives. Some of the plan’s key components are a production plan, a financial plan, and a marketing plan. Examples of other possible components include a human resources plan and a strategic plan if the farmer is planning to take the business in a new direction.
However, planning needs are unique to each farm. Various workshops, books and online tools are available for farm business planning, and Ivens recommends farmers investigate the different approaches so they can choose ones that will work for their own needs.
Ivens and Penelope Tunnell, an information management specialist, have co-developed a free online process called FarmOrganizer.com to make business planning — including plan development, implementation and record keeping — easier and more engaging for farmers.
“Too often business plans are created in a format that doesn’t engage the farmer over the long term and isn’t accessible to being implemented easily. FarmOrganizer offers a simple, yet comprehensive toolbox for farmers to think about, plan and manage their farms,” Ivens explains.
FarmOrganizer views a farm as a system composed of many components working together. The website includes worksheets to help the farmer consider each of the system’s components, such as production, marketing, finances, performance management, knowledge base, and human resources. “For every farm activity, our worksheets support the thinking and collecting of information around that activity. The organizational structure can also be used as a way to organize documents and paperwork,” says Ivens.
“The worksheets are easy for farmers to refer to and update, providing a simple-to-maintain knowledge base. From that knowledge base of information all about the farm that most people have entirely in their heads, a business plan can be produced at any time.”
FarmOrganizer is designed to be adapted to the needs of individual farms. Ivens notes, “I encourage folks to choose the areas that are most relevant to them, that they are needing more support in, as well as to look at the methodology under ‘1.1 Planning’ that gives shape to a suggested planning process.”
Opening up to all the possibilities
When Ivens works with farmers on their plans, the first step is usually to look at their farm’s current situation and assess the present state of each component of the business. Then the farmers consider where they want to go from there so they can build a vision for the future.
He says, “A key step in that process is coming to a point where the farmers feel like they have a choice amongst a variety of options for their business before they go into planning in detail. I encourage them to list all the possible options for their business, and then to research each option, before making a decision to plan in detail.
“The last thing you want to do is waste your time planning in detail and implementing something that isn’t a great option for the farm. You [also] don’t want to miss out on a possibility that was just a couple of words written on a page but, after some research, could turn into an opportunity that would really benefit the farm.”
Getting feedback on your ideas
Another tip from Ivens is to engage others in your plans. “If there is one place to start with business planning, it is getting feedback on your farm business ideas. One of the things we really encourage in working with clients is the formation of an advisory committee. These aren’t people wearing suits and ties; they might be your suppliers, buyers, neighbours, family, investors,” he explains.
“Meeting with them can be as informal as going to a restaurant for dinner and maybe having a written outline of the proposed direction for the business or the issue at hand, or maybe it’s all verbal. But engaging a group of people in the challenge or possible future direction is an incredibly valuable tool to get those other minds thinking about your farm. And as you build relationships with those people, you can keep coming back to them and their knowledge of you and your farm only gets greater and greater.
“You don’t have to take their suggestions, but I think many people would be surprised at the ideas coming out of the group that, at the end of the day, will make for a happier, healthier and more profitable farm.”
Working with other producers can also make the planning process easier and more enjoyable. Ivens notes, “Business management clubs of producers working together are a great way to learn from others. Hiring experts as a club or group reduces the costs and brings in help on specific issues facing the group.”
Business planning activities like record keeping and time management have a tough time competing with day-to-day farm operations. “I suggest starting small by picking one thing you’re interested in. For instance, you might track production costs on a particular product, like carrots, or wheat, or cattle, or perhaps marketing costs,” advises Ivens.
“By tracking that information, you can see the progress you’re making and how you might adjust your plan for even better results in the next year. Those benefits can encourage you to keep going with your recordkeeping, planning and implementation so you can reach your goals.”