March 29, 2023
One thing that guided dairy owner Amy Brickner in her decision-making was the development of a business plan.
Speaking at the recent Pennsylvania Dairy Summit in State College, Pa., Rob Goodling, ag business consultant with Horizon Farm Credit, said he often finds business plans gathering dust in a binder in the farm office or on a computer disc somewhere rarely being referred to.
This is a mistake, he says, especially if you are wanting to do something value-added: “The big thing with business planning is it allows you to be more proactive versus being reactive” in managing.
Some farm owners who are interested in doing something value-added like to focus on several areas. However, Goodling thinks producers should keep things simple and focus on three:
1. Define cash flow. Figure out how much money is coming out and how much will be spent to make that product or service.
2. Know who your customers are. “They are a huge part of this, and sometimes in the dairy world, we don’t think about the customers necessarily from the standpoint of who we are selling our milk to, but it’s a very vital part,” he said.
3. Define the business concept. “What do you want to do? And if you’re looking at bringing in the next generation, what do they want to do?” he asked.
Once a plan is on paper, it should be integrated into the farm’s business process. “What does it look like? Are you tracking things? Do you have goals, something measurable or attainable? Something you can track and say, ‘Yes, we’ve achieved our goals for year one,’” he said.
And if things are not going to plan, find out what is not working and what can be done differently.
In pursuing a value-added venture, Goodling offered other considerations for a business plan:
Think about your labor. “Ask yourself: ‘Do we have a people person?’ I’ve been on farms, and they say, ‘Yeah, I want to go into bottling milk on our farm.’ And I have the candid conversation of, ‘That’s great. Now who’s the people person that’s going to either manage the labor or be that front-store person that’s going to be able to talk to a customer who’s always right even when they’re not?’”
Engage the plan more actively. “Hit the green light right away. Don’t stop. Reevaluate while you’re there, and then adjust. It’s a cycle, not a static line. It’s a continual process,” he said.
Revisit and adjust goals. “This is hard, because you have to keep going, not just meeting goals and being done. There’s always opportunity to do something and make the business better.”
Refine the marketing plan. “This is about knowing what the customers want, and in dairy, this is constantly changing, so be aware of that. If you’re in processing, how do you flip that switch quickly? That’s a challenge.”
Review personnel and labor needs. “This is always a hot topic and always changing. Are the right people on the bus? Do we have the right skills? Do we have the right people who can learn new skills, if necessary?
Review metrics and find successes. “You need to be able to measure your successes and keep track of important metrics. Key financials are great, but maybe there is something unique to your business that you may want to track. And also, think about what’s ahead. Stay proactive; don’t get stuck in traffic because you can’t make a change. Divert if you need to do so.”
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