Do you have a business plan? No matter how big or small a business is, it has to have a business plan. Just the idea of how you want your business to run and what you want to accomplish isn’t enough. Banks, investors, partners, and your significant other want to know how you will make your farm or ranch profitable and sustainable.
Think of your business plan as a roadmap. You can always change your mind along the way, but it is best to know the general direction you want to go.
Let’s get those ideas out of your head and into a plan.
“If you don’t know where you’re going, you’ll end up someplace else.” Yogi Berra
Business planning is such an essential part of running a business. It is one of the critical elements for having your farm or ranch on solid ground.
In the old days, banks, or occasionally a family member, would lend you money based on your name and a firm handshake. Now, things have changed.
Banks have to see that you will be making a profit, and they want to know how you plan to do it. They want to lend money to a business, not a hobby idea. It’s not personal; they need to ensure that they will get their money back.
Besides the banks or anyone else who becomes a part of your business, you need to get paid too. Even if your end goal isn’t about money, you have to have profits to keep growing your business.
Before we continue, I will point out – business planning isn’t just for newbie business owners. All businesses should have a plan in place. And this plan should be reviewed and modified as needed. Business planning is not a “set it and forget” type of project.
Okay, let’s do this! As you go through these steps, you will start to see your business come to life. Grab a piece of paper or your brain book, and let’s start planning your business.
Dream a Little
You are staring at a blank sheet of paper. Think about your future. What do you see?
As these thoughts come to your mind, write them down. You will start to see what is important to you in your personal life.
It is imperative to remember that your personal life and your business life have to exist together. You have to be realistic about the time commitment you have available outside of your personal life.
This part doesn’t need to be in your “official” business plan. But, it is an excellent exercise for getting your creative juices flowing. I like to refer to this part as “creating your Big Picture.” You can get a good view of what you want your life to look like from here.
Create your Vision Statement
Okay, let’s talk about your vision statement. Have you heard of this before?
A vision statement is a company facing affirmation. It’s an in-house statement that is put in place to direct you and your team towards the future. Every decision you make within your business should be to advance your business towards this vision.
Keep in mind, this is a powerful statement so take some time to get it right. The vision statement has to be strong enough to motivate your decisions and inspire you and your employees. If this statement gets written down and chunked in a drawer, you did it wrong.
The vision statement will be short and sweet, a one or two-sentence message that says what your business will be.
Let me show you what the vision statement looks like for Texas Farm & Ranch Solution, LLC:
“To empower and inspire anyone to become successful micro-farmers and ranchers.”
From this statement, I make sure that everything I do will empower and inspire anyone to become a successful ag business owner. The definition of their success is their own. I help them to get there through my writing, coaching, and guidance.
Form a Mission Statement
Another statement that is necessary for your business is a mission statement. A mission statement is not the same as a vision statement.
A mission statement is a company and customer-facing message that tells them what your company can do for them presently.
This quote from Jamie Falkowski is an excellent guide: “A vision is aspiration. A mission is actionable.”
There are three main parts to a Mission Statement:
- what you do
- for who
- how you do it
Let’s use an example of a fictitious micro farmer’s business. The company is called Kristen’s Garden, and they grow organic produce.
Their Mission Statement could look like this:
Kristen’s Garden provides quality, organic produce to our community using sustainable growing practices and chemical-free products.
I recommend you write out a few sentences with the core of what you want to say. Choose the best one that hits all three points.
Your Mission Statement isn’t permanent. If, along the way, you have a different outlook or approach, all you have to do is change it.
The Mission Statement for TxFRS looks like this:
Texas Farm & Ranch Solution, LLC offers a unique educational experience for micro farmers and ranchers by providing the best farm and ranch resources.
I elaborate a little more about what you can expect from TxFRS here.
When someone wants to know what your business is about, they will summarize it in the mission statement.
Generate Company Values
Stemming from the mission statement is a good set of company values. Your values may not be easily defined when you are just getting started. But, there will be something you know you want your business to stand for.
For example, your values may be a set of words you feel strongly about, like integrity, ethics, and commitment.
Another way to form your values is in simple statements: We put our customer’s needs above our own. We honor God. We recycle.
Your company values are guidelines for your business and team members. A common practice when hiring someone new is to have them read the company’s values. It’s like an oath of what you expect to see in them and what they can expect from your business. If they don’t feel comfortable with the company’s values, it may be difficult for them to work towards your company’s future.
Professional Partner Business Planning
The Vision Statement, Mission Statement, and Company Values are all critical parts of your business plan. Now we move on to the “business” side of planning, the part that lenders, potential partners, and investors want to see when you propose your business ideas to them.
Don’t worry if this all sounds like corporate talk. Remember, it doesn’t matter how big or small your business is; you still have to treat it like a business.
Set Business Goals
At the start of your business journey, you pick your business goals. Most of the time, these goals are profit-based or product-based.
Banks and investors want to see where your business is planning to go with its growth. If your intention is to “just get started and see what happens,” this will not sit well with those who have money on the line. They want to see that you have plans and are prepared to make their money back for them.
When you start to work on your business goals, start from the farthest deadline you have and work your way back. For example, set a 10-year goal, then a 5-year goal, 3-year goal, 1-year goal, and ending with monthly and weekly goals.
Keep in mind, when you are making business goals, they are not permanent. As your business starts to take off, you may find that you hit your goals more quickly than expected. Or, you may find that you need more time or you need to adjust your mark.
Map it all out
As you look at your goals, you will start to see what you need to do to achieve them. I recommend using a mind mapping tool to get your ideas and steps out in front of you.
Mind mapping will help you get a visual of what you need for your ideas to come to life. Listing out the significant steps and roadblocks you need to accomplish and overcome for each phase will help you create a plan.
Now that you have the major time frames and steps in front of you, we will move on to how you will be making money.
TxFRS Tip: Making money is not the same as making profits.
List out all the revenue streams you would like to have in your business and the approximate time you would like to have them added.
Next, give a reasonable estimation of how much money you can potentially bring in from these income ideas. Be practical about how much money you think you could make and the prices you can expect to get.
No matter what your money-making ideas are, you have to sell them to someone to make money.
Don’t rush through this part. It’s easy to think the only option you have to market something is with traditional methods. But technology and ideas have come a long way.
If you are raising beef, stop thinking you can only sell through a local livestock auction ring. You may have a good set up to create an online auction, private treaty sale, or directly to a packing facility. Farm-to-table restaurants are becoming increasingly popular. Your beef, and values, may be better suited for that kind of business.
Map out several different options. You never want to have one single source of selling. Things change all the time, so make sure you do not put all of your ideas into one income source or method.
Also, know how far you are willing to travel to get your income. We will talk about expenses shortly, but for now, allow yourself to travel mentally. Is there a place you have heard about that you would be willing to travel for your product or service? Is there a new-to-you technology that you know will benefit your selling options?
Have different options for your marketing strategy. Take this time to research online and in-person alternatives. Never have just one way to market your services, products, and commodities.
You now have a list of ideas and marketing plans that might make your business successful.
These ideas might be a success. Or, they could be a massive waste of your time and resources.
A significant step that gets missed by most business owners is the validation of their idea. Their product, service, or commodity might be a great idea to them, but is there a need for it?
I will warn you. This part of making a business plan can take up a lot of time, which is why most people skip it. The time you spend on this part of your planning can save you time and money later on.
Talk to people in the locations you want to promote your business. Meet with other business owners who would be a good fit for your business. Let them know upfront that you are still in the planning stage. Do not make any deals just yet. You are researching. You’re not even sure you can make a profit yet, so don’t promise anything you aren’t ready to deliver.
You may find that some of your products or services are not needed. Do not let this dissuade you from continuing your business. Go back and modify your plan or ideas and repeat the process.
You want to know for sure you have something that other people need or want; this is how you create demand.
Validating can take time. Make sure you have enough time scheduled to do the process right and thoroughly.
Expenses are inevitable. But they are necessary for your business. Now that you have a validated product or service, it’s time to see how much it will cost you to produce it.
List or mind map all of the expenses you will incur along the way, right down to the office supplies you will need. Here is a short list of costs you might run into:
- Business formation, legal fees, insurance, bookkeeping, and billing services
- Loan interest, credit card interest
- Large equipment, office equipment
- Hired help, payroll, owner’s pay
- Initial livestock purchases, livestock future purchases
- Plants, seeds
- Fencing purchases, building purchases, water supply, and rent
- Advertising and marketing expenses, commissions paid
- Training, courses, licenses
- Office supplies
Some of these things will require you to research and price compare. Do the work. Know what your business needs and doesn’t need. Make investments, not purchases. The less money you spend on unnecessary purchases, the more profits your business can collect.
Let’s talk about money. I am going to insert my favorite story to tell. It was a conversation that sparked the birth of Texas Farm & Ranch Solutio, LLC:
A few years ago, while I was working at the sale barn, I handed a gentleman a check through the office window for a few cows he had sold that day.
“Damn. I made a lot of money,” he said, pushing his cap back from his brow.
“How do you know that?” I asked him. He had a confused look on his face.
“Because I have a check,” he replied, holding up his freshly printed check.
“Anyone can cash a check. How do you know you made money?”
Businesses don’t make money. Businesses make profits. Profits are what is left after you have deducted expenses. Just because you cash a check does not mean you made money.
PROFIT TEST YOUR IDEAS
Expenses you already paid for are still expenses you have to subtract.
You buy a bottle calf for $100 and eventually sell it for $600. You did not make $500. Suppose it had cost you $120 in milk replacer and $200 in feed to get the calf to a decent weight. Your feed expenses are $320. Don’t forget to calculate your pay per hour by the number of hours it took to feed the animal every day.
You didn’t make any money from this calf. Not all revenue-generating products or services are profitable. Profits are what you have leftover after you deduct expenses.
Situations like these are why a daily bookkeeping habit is so essential for your business. It is the only way to know if your business is being profitable.
Your goals may not be profit drive, but profits are the fuel to keep your business going. Banks and investors want to see how you plan to be profitable.
As you go through your income and expense ideas, figure out what your profit will be. It won’t be exact, but you should get a good picture of how your earnings will look.
If something is too much of a loss, you will have to figure out how to change that. I recommend reviewing your profits often.
Now that you have a clearer picture of what you want from your business, let’s talk about a few legal things to keep in mind.
Remember, I am not a lawyer, and this is not legal advice. I recommend you have a few meetings with your lawyer to determine the type of entity structure you need for your business.
When you have your business mapped out, you can see how your business forms into something of its own. But, your business is never separate from you until you make it that way.
Forming an LLC (Limited Liability Company) or a legal partnership can help protect your business and yourself from several different situations.
We are almost to the end, and we have reached the most fun part of planning — the business budget.
You will encounter things along the way that you weren’t expecting to purchase or have to pay. That’s okay. The more prepared you are now, the more you will be ready to handle those things when they come up.
Take a look at your expenses and potential income. The money you have or plan to get may not cover everything you need. Setting a budget doesn’t hinder your spending; it just tells you how much you can spend in that category.
For example, if you have a $50000 loan or limit to start your cattle business and spend $45000 on the animals, you won’t have much money left to feed them.
Be wise about spending and investing. Map out how much money your business needs and how you will spend the money. Do not rush this process.
Repeat budget planning yearly.
Congratulations! You made a Business Plan!
You have done some impressive work so far. Now, it’s time to put it all together.
If your business plan is strictly for yourself, remember to put it into a format that anyone will understand. You never know when you may have a potential business partner or investor knocking on your door to join you.
When making your business plan for a bank or investor, check with them to ensure they do not have a specific form or format they want you to use. If they do, you have your information; you will just need to insert it where they want it.
Visit your business plan often. Keep informed on your expenses and incomes. Validate any new idea you want to add along the way.
Remember, this is a plan. Nothing is permanent. Keep a business mindset as you run your operation, no matter how big or small it is right now. You are the CFO of your business. Make changes as you see fit.
Bookmark this page and revisit it any time you need guidance to make changes to your business plan.