Developing a Business Plan

Developing a Developing a Business PlanBusiness PlanA Step by Step Guide

This Material Developed This Material Developed By By Joseph Bonelli from the University of Connecticut and Jon Jaffe from Farm Joseph Bonelli from the University of Connecticut and Jon Jaffe from Farm

Credit EastCredit East

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“This institution is an equal opportunity provider.”

What is a Business What is a Business Plan?Plan?

• Tool used to convert idea into a reality for either a new business or for changes to an existing business

• Keeps everyone focused on same goals

• Provides a necessary analysis of all aspects of the business

• A business plan is a dynamic document – For each business stage, the business plan must be updated 3

Business Plans are Business Plans are Written For:Written For:

• Owners

• Business managers

• Lenders and investors

• Consultants and employees

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Basic ComponentsBasic Components• Executive Summary

• Business description

• Operations

• Marketing plan

• Management

• Financials5

Section #1 Section #1

Executive SummaryExecutive Summary

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Executive SummaryExecutive Summary

Overview of:

• Your business including product or service and what you will do and how you will do it

• Key elements of business plan

• Why business will be successful

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Executive SummaryExecutive SummaryInclude the following information:

• Business Description

• Mission Statement

• Goals

• Capital Needs

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Business DescriptionBusiness Description

• Provide a brief description of all aspects of your farm business

• Include an overview of the business products and/or services

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Mission statementMission statement

• Explains the scope and essence of the business

• States why it is in business

• Must express the collective values of the business

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Mission Statement Mission Statement ExamplesExamples

• Good – Produce a healthy and nutritious product at a reasonable price for our customers

• Bad – Make lots of money

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GoalsGoals• Goals are directions for your business and outline

what you want your business to look like in the future

• Too many goals may result in less effective results. 4 to 8 is probably about right for most small businesses

• All activities undertaken by the business should have the objective of achieving these goals

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GoalsGoalsConsider these areas when developing goals:

• Business Marketing

• Crop practices

• Financial considerations

• Personnel and personal needs

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GoalsGoals

Goals must be:

o S pecific:

o M easureable

o A ttainable

o R ewarding

o T imed

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Capital NeedsCapital Needs

• Provide an overview of the business capital requirements and an overview of the major purpose(s) for which the funds will be used.

ExampleTractor: $12,000Plow: $2,000Harrow: $2,000Start up money: $6,000Total need: $20,000

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Section #2Section #2


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• What business will you be in?

• What will you do?

• What will you produce?

• What service will you provide?

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LocationLocation• Physical Address

• Description of property, i.e. acreage, buildings and other defining attributes.

• Proximity to nearby towns

• Proximity to other “landmark” locations

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Products and ServicesProducts and Services

• What product or products does your business produce?

• What service does it provide?

• This section should be descriptive and explain what is “unique or special” about what you sell.

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Size and Scope of Your Current Size and Scope of Your Current

and Planned Businessand Planned Business• Be descriptive

• Dollar Sales

• Volume of sales

• Customer count

• Is business new, or existing?

• If existing, is it stable or growing?20

PersonnelPersonnel• Who owns the business?

• Who runs the business?

• How many employees?

• Full-time versus Part-time

• Year-round versus seasonal

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Legal StructureLegal Structure• Sole proprietor?

• Partnership?

• LLC?

• Corporation?

• Other/Multiple entities?

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Special Attributes of Special Attributes of BusinessBusiness

• Why was this business started?

• What is special about the business or products?

• Why should the customer be excited?

• Why should the reader of this plan be excited? • (Hint: You want the reader excited if you are trying to get something from

them such as a loan)

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CustomersCustomers

• Who are your customers?

• Where are they located?

• Are they single visit or repeat?

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CompetitionCompetition• Who is your competition?

• Where are they located?

• What is the biggest challenge they present?

• What weakness do they have that you plan to exploit?

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Growth PlanGrowth Plan• What is your expansion plan, if you have one?

• How fast do you want to grow?

• Do you plan multiple locations?

• What is the biggest opportunity for growth?

• What is the biggest limitation?

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OperationsOperations

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OperationsOperationsInclude the following:

• Production system

• Risk management

• Timeline

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Production SystemProduction System

• If you produce crops, describe your current and future crop plan including crops produced, acreages, and yields.

• If you provide a service, describe how you provide that service

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Risk ManagementRisk Management

• Business insurance

• Labor: Health and disability

• Contracts: Legal liability

• Compliance with all local, state and federal regulations and tax requirements

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Your Current Risk Your Current Risk Management Plan ?Management Plan ?

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Is the plan adequate to manage the increased risk exposures of the current year?

Are you prepared to live-with the business plan interruptions that would occur if a sizable loss/disaster occurred?

What is the deadline for making the needed changes to it?

What Action do you plan to take and when?

Remember it’s your responsibility to develop the plan…and to live with the consequences of the plan

TimelineTimeline

• The tasks that must be completed

and

• The date when the tasks must be completed to achieve goals

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Marketing PlanMarketing Plan

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Marketing PlanMarketing PlanBig Picture Questions. Are you?

1. Wholesale or retail?

2. Year-round or seasonal?

3. Prime location or a destination?

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Target CustomerTarget Customer• Local – define target area

• Destination – special trip

• One shot or repeat customers?

• Online sales?

• What is your “ideal” customer?

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Marketing SitesMarketing Sites• Website?

• Facebook?

• Other social media?

• Newspaper?

• Billboards?

• Radio?36

Other Marketing Other Marketing OptionsOptions

• Customer Loyalty Programs

• Coupons

• Discount Sales

• Educational Classes

• PR/Goodwill Efforts

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Why Should They Buy Why Should They Buy From You??From You??

• Product or service quality

• Specific knowledge

• Price

• Convenience

• Buy local

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Who Will Develop the Who Will Develop the Marketing Plan?Marketing Plan?

1. Owner?

2. Employee?

3. Marketing Firm?

4. Other?

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Who Will Execute and Who Will Execute and Oversee the Marketing Oversee the Marketing

Plan?Plan?

1. Owner?

2. Employee?

3. Marketing firm?

4. Other?

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Cost of Marketing Cost of Marketing EffortEffort

• Initial Cost - i.e. Website development

• Early Years – 3 -5% of gross sales likely

• Ongoing – 1 – 3% of gross sales likely

Which form of marketing is going to give you the most “bang for your buck”?

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Exterior SignageExterior SignagePrimary Sign – How does it greet your customers?

Parking signs – Make it easy

Entrance sign – Sounds simple, but rarely used!

Outside product – Location and description

Outside service/event – Location and description

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Interior SignageInterior Signage• Printed or handwritten?

• Direction signs

• Pricing signs

• Information booths or customer service area

• Cashier/checkout location

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Other Marketing Other Marketing EffortsEfforts

Customer loyalty programs

Gathering customer info (emails and addresses)

Analyzing Customer Data – Now what do you do with this information?

Using this information – What is the customer benefit?

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Marketing – Risk Marketing – Risk MitigationMitigation

o Track Commodity Cycleo Contract Input Prices (i.e. lock in fuel prices)o Value Added Productso Product Diversificationo Spread Sales over Seasono Market Thru Alternative Channels (i.e. CSA)o Increase Direct Sales

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ManagementManagement

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Management Management

Include the following information:

• Management team

• Personnel plan

• Organization

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Management teamManagement team

• List the members of your management team. • Briefly describe their qualifications and their

management roles.

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Personnel PlanPersonnel PlanDevelop:

• Job descriptions

• Compensation plans

• Employee handbooks

• Training procedures

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OrganizationOrganization

• Explain how owners and employees relate and contribute to the success of the business

• If starting or expanding a business, describe the new positions

• Develop an organizational chart for all employees

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Sample Organizational ChartSample Organizational Chart

Farm Owner

Production Manager

Sales Manager

Office Manager

BookkeeperMaintenanc

eGrower

Sales person

Sales person


FinancialsFinancials

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FinancialsFinancialsKey Financial Information

•Financial Statements – Current & projected

•Earnings – Historical & projected

•Capital Spending Budget

•Cash Flow – Annual & monthly

•SWOT Analysis53

Current Financial Current Financial StatementStatement

• Assets owned – Detailed list

• Liabilities owed – Detailed list

• Net worth – Assets minus liabilities

• Liquidity – Coverage for the unexpected

• Leverage – Green light, orange light or red light?

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Projected Financial Projected Financial StatementStatement

• What is your net worth after changes are implemented?

• How much greater is your leverage?

• New liquidity position

• Room for adversity?

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Historic EarningsHistoric Earnings• History of gross income

• History of net income

• Consistent or varied earnings?

• Discuss any “special events” that affected historic earnings.

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Projected EarningsProjected Earnings

• Project earnings for the next 3 to 5 years depending upon the scope of the changes planned.

• List assumptions used

• Note whether your assumptions are “most likely”, “best case” or “worst case”

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Capital Spending Capital Spending BudgetBudget

• How much do you plan to spend?

• What do you plan to spend it on?

• Source of funds for spending?

• Cost overruns budgeted?

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Cash Flow – Annual Cash Flow – Annual ReviewReview

• Annual cash flow review allows you to see whether projected business earnings are adequate to cover debt service, living needs and capital improvement needs for each year projected.

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Cash Flow – Monthly Cash Flow – Monthly AnalysisAnalysis

• Monthly cash flow analysis lets you see if there will be certain times of the year where cash flow is inadequate and liquidity or operating loans needed to be tapped to cover these shortfalls.

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SWOT AnalysisSWOT Analysis

• Strengths – What are the strengths of this venture to capitalize on?

• Weaknesses – What are the weakness of this venture to mitigate/minimize?

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SWOT AnalysisSWOT Analysis

• Opportunities – What are the opportunities in the current and future market?

• Threats – What threats are out there for this venture – i.e. competition opening down the road, etc.?

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Financial Discussion Financial Discussion SummarySummary

• What do the numbers tell you?

• What do the numbers tell the reader?

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Business Plan - Wrap-Business Plan - Wrap-UpUp

• Final thoughts

• Encouragemento Put in the timeo Ask questionso Keep an open mindo Embrace the challenge!

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Developing a Business Plan

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