BUSINESS PLANNING

By:
JOYCE S. WENDAM, CESO IV, DR.DEV., Ph.D., DCOMM
Former Regional Executive Director –NIR
Regional Technical Director - DA RFO VI
Part-time Professor, Graduate School, Philippine Christian University,
Iloilo State College of Fisheries and Central Philippine University CARES
May’s Garden – May 21-22, 2019
WHAT IS A BUSINESS PLAN

 Plan - any scheme, program, or method worked

out beforehand for accomplishing one or more
objectives or goals.
 Business plan - a document that summarizes
how a business owner/manager/entrepreneur will
organize a set of resources and implement
activities for the venture to succeed.
WHAT IS A BUSINESS PLAN
 Outlines how to achieve business objectives.
 Provides a road map and a timeline showing where you
are, where you want to be within a given time period,
and how you intend to get from point A to point B.
Therefore, you should be directly involved in the process
of:
- establishing goals;
- assessing resources;
- determining what is needed; and,
- creating a strategic action plan.
Why do you need a business plan

 It is best for business plans to be written

documents.
 Some advantages of preparing a written
document:
(1) it forces you to refine your ideas and
objectives so that you can easily
communicate them;
(2) it allows you to examine how your product or
service will satisfy the needs of your targeted
consumers;
Why do you need a business plan

(3) provides a blueprint of exactly how you

intend to operate your business;
(4) reduces the chance of there being any
ambiguity among personnel as to the
objectives of the business and what is
required of them;
(5) effectively communicates your objectives
to others;
Why do you need a business plan

 (6) provides basis for soliciting feedback; and

 (7) shows that you have done necessary
preparatory work when seeking outside funding.
Altogether, business plan is a way to show that you
know how to produce the product, how to sell it, and
how to manage financial risk (SARE 2003).
Main Components of Business Plan

Components of business plan can vary

considerably:
 Executive Summary
 Description of a Company
 Marketing Plan
 Operational Plan
 Human Resource Plan
 Financial Plan
Main Components of Business Plan
 1. Executive Summary:
 Appears first in a business plan but usually
written last.
 Contains brief description of vision,
mission, & goals of business.
 Summarizes key elements of business plan,
such as strategies, sales growth, and
profitability.
Mission

 Mission Statement:
 Purpose of your farm operation (1 or 2
sentences)
 Answer – Why does your business exist,
what purpose and where are you headed.
 Think about:
- WHO you are
- WHAT you do
- WHERE are you headed
GOALS
 Goals:
 Specific and measurable statements of what the
business expects to achieve.
 Can include production, marketing, financial, etc…
 Goals are SMART:
Specific
Measurable
Attainable
Rewarding
Timely
 Short term goals are one year or less, long term goals are
one year or more)
STRATEGY

 Strategyincludes steps focused on market

segments, attributes of those segments and
forming a strategy around the needs of that
segment.
 Farm Strategy is an important component of a
business plan.
Farm Strategy

 Step 1: Gathering information and market research.

 Step 2: Analyzing the external and internal
components of your business using the
S.W.O.T. analysis.
 Step 3: Creating alternative plans of action and
 identifying areas of competitive advantage.
 Step 4: Formulating a strategy is selecting the best
 plan that fits your overall farm mission.
 Step 5: Implementing and evaluating the strategy.
Step 1: Gathering information and
market research.
 MarketResearch: Research your current
and potential markets to identify trends,
competitors, needs and buyers.
 Focusgroups, demographics, surveys,
observation, interviews
Step 2: Analyzing the external and internal
components of your business using the S.W.O.T.
analysis.
 S.W.O.T. is an acronym for:
Strengths
Weaknesses
Opportunities
Threats
Strengths and Weaknesses

 Strengths and weaknesses are internal sections

to the organization and provide insight into what
components provide competitive advantages.
 Evaluation of the Internal Environment
 Financial resources
 Management capability
 Human resources
 Location
 Facilities
Threats and Opportunities
 Threatsand opportunities are external to the farm
and can not be changed, therefore the farm MUST
change with and react to these factors.
 Evaluation
of the External Environment
 Competitor analysis
 New/expanding markets
 Regulations
 Technology
 Economics
Step 3: Creating alternative plans of action
and identifying areas of competitive
advantage.
 Pulling it all together – Internal Strengths
with External Opportunities
 Plan of Action
 What is unique, what is your competitive
advantage, what will your consumers
value
Step 4: Selecting the best plan that fits
your overall farm mission.

 Itis now time to select the plan that best fits

your overall farm operation
 Keep in mind SWOT
 Can you see yourself doing this in 5-10 years?
 Includemarketing, production, finances and
management along with your competitive
advantages.
Step 5: Implementing and
evaluating the strategy
 How are you going to get it done!
 Followingthe financial plan there is a
section that focuses on implementation
Implementation Strategy
 Research completed, finances in order, time to
implement:
 Production
 Management
 Marketing
 Human resources
 Finance and accounting
 Implementation plan includes a timeline, your
ultimate “To-Do List”
Main Components of Business Plan
 2. Description of Company:
Covers all aspects of business, such as:
- Name,
- Location, and
- History (including a summary of past
performance for an existing
company or start-up plan for a new
company).
Background Information
 Logistics: Name, address, ownership, advisors,
employees
 History: A Summary of the history of the farm
operation/business
 Operation Layout
 Legal and Contractual Situation:
Assets, contracts, insurance, estate plan,
retirement, conservation programs, other
 Production:
Acreage, yields, livestock
Main Components of Business Plan
 3. Marketing Plan:
 Identifies targeted customers;
 Describes products or services being
offered;
 Examines competition, pricing
strategies, and advertising;
 Predicts sales forecasts; and
 Explains how the product will be
distributed and packaged.
Marketing Plan
 Market research
- Completed during the SWOT analysis
 Target Market
- It is important to understand who is
purchasing your products so that your
marketing efforts will reach that segment.
You cannot be everything to everyone.
- In order to effectively market, you need to
cater your product and services to the set
of customers who will see value in the
product you are offering. Who are you
marketing to?
Marketing Plan
 Target market can be developed by:
 Demographics – age, gender, family size,
education, occupation
 Geographic – location, city, urban, rural
 Psychographic – behavioral patterns,
lifestyle similarities, common interests,
beliefs and hobbies
Marketing Strategies

 4 P’s of marketing
 Product
 Price
 Place
 Promotion
4 P’s of Marketing - PRODUCT
 What sets your product apart
from others? What are the
products main attributes
 Includes – Market research,
logos, slogans, sizes and packaging
 Physical/service
 Features vs Benefits
4 P’s of Marketing - PRICE

 How much value does your product

offer? How are you going to make
pricing decisions?
 Cost of production
 Break even point
 Market position
 Re-price and evaluate
 Perception
 Location
 Supply and competition
4 P’s of Marketing - PLACE

 Where will you sell your product?

 Where does your target market
shop?
 Locations and logistics
 Transportation and distribution
 4 P’s of Marketing- PROMOTION
 Where is the best value for your
promotional money and efforts and
how will you determine if they are
working?
 Unpaid – Positive, PR, newspaper
 Paid – Advertising, publicity, sales
promotions Positive
 Be creative!

Positive?
Marketing Budget

 Research
 Communications
 Networking
 Promotions
 Advertising
 Public Relations
 Distribution
Main Components of Business Plan
 4. Operational Plan:
 Includes a detailed description of how products or
services will be produced.
 Specifically, it focuses on the ff.:
- production system(s) to be used;
- physical resources that are available or will need
to be acquired (purchased or leased);
- size and capacity of the business; and
- regulations/policies governing product production,
such as special permits, zoning, and licensing.
Main Components of Business Plan

 5. Human Resource Plan:

Describes organizational structure of business
(identifies who will manage the business;
number and type of employees needed; &
provides information on compensation &
benefits).
Human Resource Plan

 The people part of your plan

 Does not matter how large or small your
business
 Parts of the Human Resource Plan
 Position and duties
 Organizational chart
 Skills and training
Position and Duties

 Include:
 Position or name of who is responsible;
 Duties and responsibilities of the position;
 Skills and talents;
 Salary and wages; and,
 Works schedules
- Seasonal, part time, full time
Organizational Chart
Skills and Training

 Continuing education and advancement in

technology is very important
 Includes
 Skills Needed
 Training available
 Who in the farm business is responsible
Financial Plan

 6. Financial Plan:
 Describes funding requirements;
 Provides detailed information on:
- break-even analysis,
- projected income statements, cash
flow, & balance sheets;& discussion of
selected financial indicators.
Financial Plan
 Very important and necessary component
of the business plan
 Balance Sheet – Net Worth
 Cash Flow – Liquidity
 Income Statement – Profitability
 Pro Forma Statements
Balance Sheet

 Summarizes Assets, Liabilities (Debt), Net Worth

 Net Worth = Value of Assets – Value of Liabilities
 Current (< 12 months), Intermediate (1-10 years)
Long Term (>10 years), Non-farm
 “A Balance Sheet is a snapshot of the farm’s
financial position”
Cash Flow
 Summarizes all cash in-flows and out-flows for a
period of time
 Checkbook Accounting
 In-Flows – crops & livestock sales, receipts, sale of
capital assets, borrowed money
 Out-Flows – production, capital expenditures, loan
payments, living expenses
 Important on farms because of seasonality
 Projected and Actual Cash Flow
Income Statement

 Summary of revenues and expenses for a specific

time period
 Revenue – Receipts from sales, government
payments, dividends
 Expenses – Production expenses, interest, taxes,
insurance, loans
 Inventory Changes – Accrual adjustment
 Depreciation and Capital Adjustments
 Revenue – Expenses = Net Income
 Main purpose is to determine how much income
was generated by the farm operation
 Components of an Enterprise Budget
Gross Revenue: The total sales of product or services from the enterprise. Revenue can
be calculated with the following formula: Price x Units Sold= Gross Revenue

Variable Cost: Cost items that vary with production volume. Examples of such items
include fertilizer, seed, fuel, electricity, piece-work labor charges, pesticides, packaging
cost, and custom charges.

Fixed Cost: Those cost that you will incur regardless of whether you produce any output. These costs
are determined using the DIRTI 5 method which includes Depreciation, Interest, Repairs, Taxes, and
Insurance. Often a piece of equipment or building will be used for more than one enterprise. In these
cases it is important to estimate the percentage of use for each enterprise and allocate the cost
accordingly.

Net Income: Net income is the money left after subtracting variable and fixed
cost. This is the bottom line. NET INCOME = Gross Revenue – (Variable +
Fixed Costs)
Projected Financial Statements

 Lender,farm operation or other factors may

require projected financial statements
 Todo this review enterprise budgets and
financial statements
Resource Inventory

 Gathering resources whether physical or an

expertise is very important
 Resource Inventory Includes
 Building and facility requirements
 Building and structure inventory
 Equipment inventory
Building and Facility Requirements

 Physical Resources
Land, Livestock, Equipment, Facilities,
Transportation
 Expertise
 Computers, marketing, record keeping,
production
 Other
Building and Structure Inventory

 Building
 Purpose
 Square Feet
 Required Features
 Location
Equipment Inventory
 Equipment Name
 Model
 Size
 Year Purchased
 Age
 Condition
 Ownership
 Book Value
 Market Value
This keeps valuable information needed for your
financial statements
Appendix

 Can include maps

 Contact sheets
 Budgets
How much detail should be a business plan

 The amount of detail in a business plan will vary

depending on purpose of plan.
 Most experts believe that, as a rule of thumb, if
plan requires outside resources (loans or equity
investment), then it will need to be between 25
and 50 pages long (generally, less than this will
not get the job done and more than this will not
be read).
 If, on the other hand, plan is for internal use only,
then plan can be shorter.
Concluding Remarks
 A common misconception is that business plan is only
needed for starting new business or to assist in securing
outside funding.
 Truth is that everyone operating a business needs
business plan.
 Sound business plan is essential to running a successful
business.
 Think of business plan as blueprint for achieving your
goals.
Concluding Remarks
 It is important to realize that business plan is not
static, but a living document that will require
adjusting as situations change.
 It is very important to routinely assess whether
the business is meeting its objectives.
 Whether you are an experienced producer or a
new producer, you need business plan.
 A simple business plan is better than no plan at
all, and it is never too late to create one.
References
 Business Net Online. BNET Business Dictionary. http://
dictionary.bnet.com/definition/business+plan.html
 Dill, Shannon. Business Management and Enterprise Development. Maryland
Cooperative Extension, Talbot County.
 Evans, Edward A. June 2008. Primer for Developing a Farm Business Plan.
UF/IFAS Extension. Original publication date June 2008. Reviewed October
2017. Visit the EDIS website at http://edis.ifas.ufl.edu.
 SARE. 2003. Building a Sustainable Business: A Guide to Developing a Business
Plan for Farms and Rural Businesses. Sustainable Agriculture Research and
Education (SARE), Washington, D.C.
http://www.sare.org/publications/business.htm